Category Archives: Politics – General

How will Obamacare ration care?

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homer_beer During the latter stages of the debate over reform of the American health finance system, one of the key issues that seemed to fade amidst the rhetoric was the question of how the revamped health finance system will ration care (see also here). Inasmuch as it is still not clear to me how care will be rationed under Obamacare, this recent Happy Hospitalist post caught my eye:

I’m down in the ER the other day when I see a chief complaint fly by on the radar.  What is that chief complaint you ask? ìRefused by Detox.î

The patient was so drunk, even the community detox center refused them.  So how did this play out?  The patient was taken by ambulance from his home to a small town community ER for altered mental status.  There, he was  booked into the ER and seen by a small town community ER physician family practice resident or PA or NP.  Diagnosis you ask? ìAcute alcohol intoxication. Plan:  Discharge to community detox center.î

The patient was then transported to detox  by a cop where he was promptly refused by detox for being too drunk. Too drunk for detox.  How sad is that.  At this point another ambulance was called and the small town hospital refused to accept him back because he was "too drunk" for them to handle if he became comatose and critically ill.

So the ambulance drove him 75 miles to Happy’s hospital which has to accept him, where he was promptly booked into the emergency department in front of the 28 year old with heart burn, the 19 year old looking to get a pregnancy test and the 14 year old who’s mother brought her in because she just had her first period.  What happened with our drunk?  He was promptly placed in a room where stat lab confirmed what everyone else had suspected.  He was drunk.  The big city ER doctor billing $500 an hour proudly made his diagnosis and disposition plans known to the world: ìAcute alcohol intoxication. Plan: Discharge to community detox.î

By now, the patient’s alcohol level was down to 320 and he was awake, responsive and asking for a samich as the cops show up to take him away. Let’s conservatively add it up:

  • Two ambulance rides $1,000
  • Two ER visits $3,000
  • Two ER physician visits $500

Almost $5,000 to take care of a drunk in which doing nothing would have given you the same result.  And you wonder why Medicaid is going bankrupt.

The Hospitalist goes on to point out how expenses such as the foregoing is eventually going to lead to failure of many inner-city hospitalists. But an equally troubling issue is whether anything will change in regard to future opportunities for misallocation of expenses under an increasingly subsidized health care system?

Frankly, I doubt it.

Thoughts on health care finance reform

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stethoscope_3 Inasmuch as Americaís fractured health care finance system has been a common topic on this blog since early 2004, many friends and readers have asked my thoughts about the health care reform legislation that was passed yesterday. So here goes.

The legislation is fundamentally flawed because it imprudently foists a top-down reorganization plan on something as complex and disparate as financing health care. But frankly, I have no idea whether it will result in a worse finance system than the current one, which is pretty bad.

My biggest criticism with both the current system and the one contemplated by Obamacare is that the patient is not the customer, at least as it relates to non-catastrophic illness and injury. Without cost control ñ and customer decision-making is the most efficient one available – neither the current system nor Obamacare will be able to maintain delivery of high-quality care to an increasingly aging population.

However, the reality is that we now have two solid generations of Americans now who enjoy having someone else pay for their health care. So, itís unrealistic to think that such a societal shift is going to change anytime soon. But itís still important to understand how we got to this point.

Employer-based health insurance became popular during World War II because it was initially exempted from gross income as a way to circumvent wartime wage and price controls. After the war, marginal income tax rates were high and individual medical expenses were tax deductible, so at least some rational incentives were returned to the medical marketplace.

But all this changed in 1986 when the Reagan Administration made concessions to achieve bipartisan tax reform. Individual medical expenses were no longer deductible until they reached 7.5% of gross income, which virtually eliminated individual incentives in the medical marketplace. Not surprisingly, everyone was incentivized after tax reform to move all medical expenses to third-party-payor health insurance. As a result, individual out-of-pocket expenses in the health care market dropped from 22% in 1985 to less than than 10% of the market now.

So, in essence, the Reagan Administration horse-traded personal tax deductibility of medical expenses away, but figured that was acceptable because at least employer health insurance remained tax-free benefit. Iím sure if we could ask him now, President Reagan would tell you that he expected a future Congress would fix such perverse incentives after the dust settled on the benefits of tax reform. But alas, that never happened.

What happens now? The only certainly is that special interests will be descending upon Washington in droves to do their bidding over the transfers of wealth that will occur under the new legislation. At least it will be entertaining to watch who wins and loses.

But there are two big points that everyone should remember as we embark on this new world of health care finance.

First, the Obama Administrationís rationalization of future cuts in Medicare spending as a funding source for the health care legislation is utterly disingenuous, as Arnold Kling artfully explains:

Imagine that your crazy uncle Fred had bought a dozen cars on credit. As a result, he faces car payments far in excess of what he can afford. He comes to you and says he has a plan that in a couple of years will reduce his car payments by a few thousand dollars. "Now I have the money for a down payment on a boat!" he exclaims, as he runs off to the boat dealer.

The equivalent is for Congress to treat future cuts in Medicare as if they were a newfound source of wealth to be tapped. Once they adopt this precedent, they can increase spending on whatever they want, in unlimited amounts, while claiming deficit neutrality. Future Medicare spending is so high that you can always come up with cuts, as long as they deferred.

Second, as Greg Mankiw notes, projected Medicare cuts in payment rates for physician services portend the rationing of medical services that the promoters of the current legislation contend wonít occur. Because few consumers actually pay for their health care, most folks donít realize that Medicare and Medicaid payment rates for physician services have already been cut by around 30% since the late 1990ís. That has led many doctors to limit substantially the number of Medicare and Medicaid patients who they are willing to treat in their practices. In my view, that trend is likely to continue under the new legislation. Who will tend to the medical needs of consumers who elect to rely on such insurance in the future?

Supporters of Obamacare generally argue that the legislation offers more equality through expanded insurance and redistribution of benefits. But the wealthy will always find ways to get around the rationing and other restrictions of a government-run health care system. On the other hand, the poor will have no choice but to accept the government health care, which is unlikely to be as high a quality as what the rich folks obtain from their private doctors. Accordingly, although the distribution of health care may be a bit more equal in the short term, I’m not sure that means more equality in health care in the long run.

Which leads me to this question: How long will it be before the federal government requires physicians, as a condition to being allowed to engage in private practice, to accept a certain number of patients under government-sponsored insurance plans that limit payments to the physicians far below what the physicians would otherwise accept?

The Metro Train Wreck

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metrorail6The Metropolitan Transit Authority has been in the news recently mostly because of a good, old-fashioned document-shredding scandal and yet another spectacular crash.

But the more important issue facing Houstonians is that Metro is preparing to force large swaths of the community — including the key Uptown area near the Galleria — to incur the enormous cost of enduring construction of its inefficient and impractical rail lines.

Bill King has spent a considerable amount of his time over the past several years studying Metro and Houstonís transit problems. In this devastating post, King finds that Metro is close to barreling completely out of any semblance of fiscal control:

There could hardly be a more fitting image for the close of the current Metro administration than the recent photographs for a wrecked Metro buses in front of Metro’s headquarters after having been broad-sided by Metro’s Main Street light rail.

The last six years are likely to be remembered as the most ruinous time for public transportation in Houston’s history as Metro has pursued a single-minded obsession to build its version of an at-grade rail system regardless of the cost, both in financial terms and in the degradation of the bus system on which over 100,000 Houstonians rely daily.

Fortunately, Mayor Parker has ordered top-to-bottom review of the agency. Here is what that review is likely to find.

Decline in Ridership. Since 2004, Houston population has grown by over 10% from just over 2 million to 2.25 million. At the same time gas prices rose 47% from $1.81 per gallon to $2.67 per gallon. These two factors should have virtually guaranteed an increase in transit.

However, exactly the opposite has occurred as bus boardings dropped almost 24% from 88 million in 2004 to 67 million in 2009. Instead of increasing bus service by 50% as it promised the voters in the 2003 referendum, Metro has slashed bus routes and increased fares by over 50%.

Today Metro actually operates 225 fewer buses than it did in 2003. An outside performance audit in 2008 found that on-time performance fell by 29% from 2004 to 2008.

Financial Disaster. Since 2003, Metro’s sales tax revenues have increased by 43%, rising from $357 million to $512 million. At the same time, its fare revenue increased by 41% from $42 million to $60 million by charging an ever dwindling ridership more.

Yet, Metro is in the worst financial shape in recent history. At year end 2003 Metro’s current assets exceeded its current liabilities by $125 million. The budget just adopted by the Metro board projects that it will have current accounts deficit of $165 million by the end of this fiscal year, a stunning loss of nearly $300 million in just five years.

Over the same period, Metro’s debt has swelled by nearly 50% from $546 million to $816 million. [.  .  .] In the meantime, the cost of the [Metro’s Light Rail Transit lines] has risen from the $1.2 billion originally estimated to something well in excess of $3 billion.

Metro is seeking to borrow $2.6 billion to build the LRT, over four times what it promised the voters would be the limit in the 2003 referendum.

Originally, Metro assured voters that it could build the LRT without tapping the mobility payments that are so critical to the Houston and the other member cities. Metro’s projections now show that it can only afford the LRT if those payments are terminated in 2014. [.  .  .]

In 2003, after a spirited public debate, this community approved, by a narrow margin, a consensus plan to enhance public transportation with a multi-modal approach. Part of that bargain was a limited experiment with a light rail system. The voters specifically limited the resources that Metro could devote to the light rail for fear that the cost might undermine the solid, dependable bus service that existed at that time. Metro’s leadership has shredded that contract with the voters in favor of its own grandiose vision of transit that has little to do actually solving Houston’s mobility problems. In the meantime, traffic congestion continues to get worse and working families that rely on public transportation to get their jobs everyday find riding Metro a more difficult and more expensive proposition.

Read King’s entire post. Metro’s defenders typically rely on the 2003 referendum as the primary basis for their continued support of such wasteful spending. But the problem with such referendums is that they ask voters to approve large public ventures such as Metro in a vacuum while ignoring Peter Gordon’s three elegantly simple questions regarding economic choices:

1) At what cost?

2) Compared to what? and

3) How do you know?

For example, assume for a moment that voters were informed of the fact that the average urban freeway lane costs about $10 million per mile and that the average light rail line costs over $50 million per mile while carrying less than one-fifth as many people as the freeway lane. And these are only average figures.

Moreover, let’s assume that voters were informed that the expenditure of a billion or so of public money on expanding a lightly-used light rail system has real consequences, such as leaving inadequate funds to make improvements to Houston’s infrastructure that would dramatically decrease the risk of death and property damage from flooding. Or whether the billion or so being flushed down the light rail drain would be better used to fix various area traffic “hotspots” where accidents or bottlenecks occur with high frequency.

No one knows for sure, but my bet is that voting results would be dramatically different if the foregoing costs and alternatives were included as a part of the referendum.

Unfortunately, the relatively small groups that benefit from these urban boondoggles have a vested interest in keeping that threshold issue from ever being re-examined. The economic benefit of light rail is highly concentrated in only a few interest groups, such as political representatives of minority communities who tout the political accomplishment of shiny toy rail lines while ignoring their constituents need for more effective mass transit; environmental groups striving for political influence; construction-related firms that feed at the trough of Metro’s poor investment decisions; and private real estate developers who enrich themselves through the increase in their property values along the rail line.

As Professor Gordon wryly-noted in another post: “It adds up to a winning coalition.”

Unfortunately, once such coalitions are successful in establishing a governmental policy subsidizing such boondoggles, it is much more difficult to end the public subsidy of the boondoggle than to start it in the first place.

None of these above-stated reasons for mass transit appeal to the vast majority of the electorate, so this amalgamation of interest groups continues to disguise their true interests behind amorphous claims that the uneconomic rail lines reduce traffic congestion (they do not), curb air pollution (they do not), or improve the quality of life (at least debatable).

How do these interest groups get away with this? The costs of such systems are widely dispersed among the local population of an area such as Houston, so the many who stand to lose will lose only a little while the few who stand to gain will gain a lot.

As a result, these small interest groups recognize that it is usually not worth the relatively small cost per taxpayer for most citizens to spend any substantial amount of time or money lobbying or simply taking the time to vote against an uneconomic rail system.

Metro’s rail system is a bad virus that has infected Houston. The cost of treating this civic virus is growing larger each month. Without immediate re-examination of Metro’s light rail plan, the increasing costs of this plan risk turning this currently manageable problem into a major civic fiscal crisis that could negatively affect the Houston area’s growth and prosperity.

As Bill King exhibits, real leadership involves recognizing that risk and addressing it, not indulging it.

Exposing the myth of American exceptionalism

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conrad_black Conrad Blackís prison routine allows him time to think and write, which is a good thing in view of the enormous waste that results from his dubious imprisonment.

This week Lord Black takes aim at the myth of American exceptionalism promoted in this recent Richard Lowry and Ramesh Ponnurus essay (Walter McDougall has examined the origins of this myth in detail in the first two books of his fine three-part series on American history). In challenging the myth, Lord Black takes dead aim at a common topic on this blog ñ the overcriminalization of American life:

The wages of this [Cold War] victory have included the stale-dating of the authorsí claim that America ìis freer, more individualistic, more democratic, and more open and dynamic than any other nation on earth.î It is more dynamic because of its size, the torpor of Europe and Japan, and the shambles of Russia.

But Americans do not do themselves a favor by not recognizing the terrible erosion of their countryís education, justice, and political systems, the shortcomings of U.S. health care, the collapse of its financial industry, the flight of most of its manufacturing, and the steep and generally unlamented decline of its prestige.

.   .    .   Rampaging and often lawless prosecutors win 95 percent of their cases (compared to 55 percent in Canada), by softening the pursuit of some in exchange for inculpatory perjury against others, in the plea-bargain system. The U.S. has six to fourteen times as many imprisoned people as other advanced prosperous democracies, and they languish in a corrupt carceral system that retains as many people as possible for as long as possible. There are an astounding 47 million Americans with a ìrecord,î and the country glories with unseemly glee in the joys of the death penalty. Due process and the other guarantees of individual rights of the Fifth, Sixth, and Eighth Amendments (such as the grand jury as any sort of assurance against capricious prosecution) scarcely exist in practice.

Most of the Congress is an infestation of paid-for legislators from rotten boroughs, representing the interests that finance their elections and exchanging earmarks with their colleagues like casbah hucksters.  .   .   .

Lord Black can sure still turn a phrase — ìcasbah hucksters.î Ha!

The future of the death penalty

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Dow_ University of Houston Law Professor David Dowís book — The Autobiography of an Execution (Twelve 2010) ñ prompted Time to ask Dow several questions about the death penalty. A couple of his answers are particularly interesting:

.  .  . I tell people that if you’re going to commit murder, you want to be white, and you want to be wealthy ó so that you can hire a first-class lawyer ó and you want to kill a black person. And if [you are], the odds of your being sentenced to death are basically zero. It’s one thing to say that rich people should be able to drive Ferraris and poor people should have to take the bus. It’s very different to say that rich people should get treated one way by the state’s criminal-justice system and poor people should get treated another way. But that is the system that we have.

And what about the future of the death penalty?

My prediction is that we’re going to get rid of it for economic reasons. We spend at least a million dollars more on a death penalty case than on a non-death-penalty case. In the U.S., where we’ve executed 1,200 people since the death penalty [was reinstated in 1976], that’s $1.2 billion. I just think, gosh, with $1.2 billion, you could hire a lot of policemen. You could have a lot of educational programs inside of prisons so that when people come out of prison they know how to do something besides rob convenience stores and sell drugs. There are already counties in Texas, of all places, that have said, this is just not worth it: let’s fix the schools and fill the potholes in the streets instead of squandering this money on a death-penalty case. You don’t need to be a bleeding heart to make that argument.

Supporters of the death penalty reason that there is nothing morally wrong about the state killing a person as punishment for murder where that person was lawfully convicted in a fair and accurate criminal justice process. But in making that moral justification the central tenet of their support, death penalty supporters are ignoring the glaring defects in the process that undermine their moral justification.

No way to fight a war

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urban4 Here we go again. U.S. military forces are put on the defensive because of what might be an unfortunate mistake in prosecuting the war against the Taliban.

When are we going to learn that fighting wars under unrealistic rules of engagement is a waste of time and precious resources?

A reasonable case can be made that the U.S. should not be conducting military operations in Iraq and Afghanistan. Similarly, a reasonable case can be made that such operations are necessary for the defense of the U.S.

But once the decision is made to commit military forces, no reasonable case can be made — particularly given the enormous difficulties faced— that U.S. Armed Forces should be constrained from winning the war by unrealistic rules of engagement.

If we are unwilling to stomach to do the dirty business that is necessary to win such wars, then we have no business getting involved in them in the first place. The defense summation in Breaker Morant brilliantly frames the issue in the context of Britain’s involvement in the Boer War:

A culture of abuse

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doj_logo_today The big legal news over the weekend is the Department of Justiceís decision not to recommend disciplinary proceedings against Cal-Berkeley law professor John C. Yoo and federal appellate Judge Jay S. Bybee for their participation in a series of DOJ memos that provided the dubious legal basis for the use of torture against enemy prisoners after the attacks of September 11, 2001. John Steele has done a great job of cataloging the blogosphereís reaction to the DOJís decision.

The DOJís report outraged Jack Balkin, who opined that ìthe standard for attorney misconduct is set pretty damn low, and is only violated by lawyers who (here I put it colloquially) are the scum of the earth. Lawyers barely above the scum of the earth are therefore excused.î On the other hand, the Wall Street Journal contends that the report vindicates Yoo and Bybee. Yoo provides his own defense here.

Although the DOJís report paints a fairly clear case of Yoo and Bybee providing a colorable legal cover for what the interrogation tactics that the Bush Administration wanted to pursue come hell or high water, that conduct is utterly unsurprising. The DOJ has been engaging in torture-like treatment over the past year of Allen Stanford, who is still awaiting trial. Similarly, the DOJ has regularly engaged in other astonishing abuses of power in connection with the prosecutions of Jeff Skilling, Jamie Olis and many others.

Our failure to hold governmental officials responsible for abuse of power toward our fellow citizens helped create the culture in which the leap to sanction torture against enemy combatants was a small one. That culture will be very difficult to change.

How much is “affordable” health care?

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image Uwe Reinhardt posted this insightful Economix post last week in which he bores in on the key issue to be resolved in reforming the U.S. health care finance system:

I could easily offer every American family a health insurance policy it could afford, simply by varying judiciously the annual deductible, the coinsurance rate, upper limits on items ostensibly covered by the policy and exclusions from coverage of sundry services or products ó for example, mental health services or certain specialty drugs.

The policy might be a sham; but it sure would be cheap.

Health insurance is just a means by which needed health care can be made ìaffordableî to Americans when they fall ill. Therefore the proper target of health policy should be the familyís total outlay on health care, including out-of-pocket spending. That total outlay on ìneeded health careî should be made ìaffordable.î

Which requires us to define concretely, for practical purposes, what we mean by ìhealth careî and ìaffordable,î pedantic as that may sound. Politicians should be forced to be utterly clear about it. [.  .  .]

President Obama could make this idea practical by using a visual device such as the table [above]. In that table ìdisposable incomeî is defined as all personal income from whatever source minus all personal income tax payments and other government deductions. The numbers are annual.  .   .   .

Professor Reinhardt makes a good point about the disingenuous nature of health insurance. As I noted here, most forms of health insurance ñ particularly the employer-based kind — insulate consumers from understanding the truce cost of their health care choices. As a result, most consumers ñ and virtually all legislators in Washington ñ have no idea on what amount of health care costs are ìaffordable.î Most insureds are pleased that someone else is footing the bill and simply donít want to lose that perk.

Health insurance is largely the product of bad governmental policy (wage controls during World War II) and, as is often the case with such policies, there are unintended consequences that are even worse than the misdirected governmental policy. In this case, we have two generations of Americans who have been largely insulated from needing to know the true cost of some of their most fundamental choices and needs in life.

Such ignorance is now hindering reform of the fractured U.S. health care finance system.  But any health care finance reform that does not rely at least in part on reigniting a consumer market to control costs will likely be even more expensive and less satisfying than the current system.

The common sense of civil unions

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church20and20state This WaPo article from last week on a recent WaPo/ABC News poll was interesting:

.  .  . opinions nationwide remain closely divided, but two-thirds of all Americans now say gay and lesbian couples should be able to have the same rights as heterosexual couples through civil unions.

In a new Washington Post-ABC News poll, 47 percent say gay marriages should be legal, with 31 percent saying they feel that way "strongly." Intensity is stronger among opponents, however: overall, half say such marriages should be illegal, including 42 percent who say so strongly.

Civil unions draw broader support. Two-thirds now say they favor allowing gay and lesbian couples to form civil unions that would give them many of the same legal rights as married couples.

Frankly, this is one of those contentious political issues for which there appears to be a simple solution. But implementing the solution will take some clear thinking, which is in short supply these days in our legislative circles.

The bottom line is that the state has no business being involved in the ìmarriage business.î That should be left to churches, some of which will approve gay marriages and some of which will not.

On the other hand, the state should provide for civil unions between same-sex and opposite-sex couples to promote societal stability through conferring the same rights relating to property, family, inheritance, etc. that are presently conferred through the institution of civil marriage.

For practical and legal purposes, such civil unions would be the same as civil marriages. And, as the poll numbers above reflect, most folks donít have a problem with providing the same contractual and legal rights to gay couples through civil unions as opposite-sex couples presently enjoy through civil marriage. However, because most states presently only provide for civil marriage, the use of the term ìmarriageî becomes a hot button issue that provokes needless opposition to the implementation of the civil union concept in regard to same-sex couples to promote legitimate societal interests.

Thus, the solution is to have the state get out of the marriage business entirely and provide civil unions to opposite-sex and and same-sex couples. Many couples would still choose to get married in religious ceremonies, which is fine. But a couple that does not have access to marriage in a church would no longer be deprived of the legal and contractual rights that most states presently confer upon only married couples.

It sure seems as if this solution would solve the primary legal issues relating to continued state bans on gay marriages. Moreover, it would relegate the debate on marriage between same-sex couples to the churches and extract it from the political arena.

Whatís not to like about that?

Milton Friedman on freedom, capitalism and colonialism

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Got to love the way Friedman ignores the contentious introduction to the questions and maintains the integrity of intellectual discourse. H/T Almost Chosen People.