Washington Policy Center Blog

Think the numbers say U.S. health care is bad? Think again

Proponents of government-managed health care often throw out numbers showing how the U.S. doesn't really get much of a bang for its health care buck.  We spend more than any other nation, they argue, yet our lifespan and mortality stats are lower than other nations.  (Somehow rationing, waiting lists, lower-quality care, and price controls, which inevitably come from government-managed health care, are supposed to improve our lifespan and mortality stats, but that's a story for another time.)

In a recent article in The New York Times, Harvard economics professor N. Gregory Mankiw sheds some light on these statistics and shows how the numbers don't mean what some would have you believe.

Ok, I know what you're thinking:  The New York Times is just a reactionary industry-backed pawn of the insurance lobby and a mouthpiece for proponents of the health care status quo.  But give the article a read anyway.

Ponder this analogy

John LaPlante at SPN's State Policy Blog makes a great analogy.  Imagine if we bought automobiles like we buy health insurance?  Yikes!

"Imagine having to call ahead to your insurer to pre-approve your next tank of gas, while waiting on hold for a reply. The gas station would submit a bill, only to be told that the filling station owner left off the insurance ID number, or that the customer had exceeded the limit of 3 tanks/month. Then, the station would bill the customer, who long since used the gas, and would feel no obligation to pay. Station owners and repair shops would raise prices to cover for the added staff and overhead of submitting insurance claims. Prices of gas, oil, and repairs would be set to maximize payment from insurers without violating insurance contracts, while preventing consumers from negotiating true market prices. Prices would spiral out of control. And that's just the beginning." (Emphasis mine.)

So do you think it would make sense to try and solve that problem by having the government buy our cars and manage their care for us?  I didn't think so.

Who's gonna pay for more SCHIP? Poor smokers.

The opening paragraph of a recent Associated Press story says it all:

"Congressional Democrats have chosen an unlikely source to pay for the bulk of their proposed $35 billion increase in children's health coverage: people with relatively little money and education."

That's tax "fairness" for ya.  But it gets better:

"The tobacco tax is a great way to pay for it [SCHIP]," insists New Jersey's Rep. Frank Pallone, "because if you tax people who are smoking and they smoke less, then we have less health problems."

Ok, but the problem with that line of reasoning is that you're taxing smokers to pay for kids' health insurance (although in fairness we should point out that many states are using SCHIP to give health insurance to adults), and Rep. Pallone thinks this will result in fewer health problems...but kids aren't the ones facing chronic health problems from smoking, at least not while they're kids.  The health problems come later, long after they're gone from SCHIP.

So the punitive aspect of higher tobacco taxes may discourage smoking, but it won't result in lower health care costs for kids, so SCHIP will continue to get more and more expensive as its revenue stream dries up.  What happens then?  They'll just have to find someone else to tax.

Why does the governor want to take a health policy dispute to court?

Governor Gregoire wants to the sue the federal government over expansion of the State Children’s Health Program (SCHIP).

Judges are in no better position to set health care policy than elected officials. Expansion of SCHIP is not a dispute over interpretation of existing law. Bush wants to expand it by $5 billion and focus health care assistance to children from low-income families. Democrats want to expand it by as much as $70 billion, cover families earning up to $63,000 a year, cover more adults, and count people up to age 25 as "children."

Bush does not want to cut SCHIP, as the media says. He wants to expand the program. Democrats want to expand it more, using a program for low-income children to cover higher-income families and adults. As often happens in reporting about government spending, a slower rate of increase is being called a cut. But no matter how much bigger SCHIP becomes, this is simply not a question for judges to decide. Elected officials should set health policy - after all, that is what we hired them to do.

Besides, Gregoire doesn’t need permission from Bush or anyone else to expand taxpayer subsidized health care in our state in any way she likes.

This year the legislature controlled a $2 billion surplus. Any or all of that money could have been used to expand state health subsidy programs, no lawsuit required.

Paul Guppy, Vice President for Research

Washington Policy Center

GAO: "Fiscal and Health Care Challenges"

The Government Accountability Office, the federal version of the state auditor, issued a report yesterday on the fiscal challenges facing the nation including health care. According to U.S. Comptroller David Walker:

• The public needs to be educated about the differences between wants, needs, affordability, and sustainability at both the individual and aggregate level
  
  
• Ideally, health care reform proposals will:
  
  
  • Align Incentives for providers and consumers to make prudent decisions about the use of medical services,
  • Foster Transparency with respect to the value and costs of care, and
  •  Ensure Accountability from insurers and providers to meet standards for appropriate use and quality.
    
    
• Ultimately, we need to address four key dimensions: access, cost, quality, and personal responsibility

Based on the current national conversation surrounding health care, the key indicator identified by GAO of personal responsibility isn’t receiving the attention it deserves. This fact is clear when reviewing the results of GAO’s survey of participants in a recent health care forum:

Health insurance coverage. There was near unanimity that ensuring the provision of health care coverage for all Americans should be a federal responsibility. The group also strongly agreed that the federal government should assure the existence of a well-functioning health insurance market, whereas they did not agree on whether the nation should continue to rely on employer-provided insurance as the dominant method through which most Americans obtain their health insurance coverage.

Unanimity that the federal government should ensure everyone has health care coverage? Supporters of limited government must not have received their invitation to the forum.

Why does any of this matter? According to GAO:

The federal government is on a "burning platform" and the status quo way of doing business is unacceptable. Today is not the problem, tomorrow is. Mr. Walker noted that the present value of the federal government’s major reported long-term "fiscal exposures"—the difference between what we have promised and what we have in dedicated revenues—totaled over $50 trillion in 2006. This represents close to four times gross domestic product (GDP) in fiscal year 2006 and is up from about $20 trillion, or two times GDP in 2000. If we wanted to put aside today enough money to cover these promises, it would take about $440,000 per American household, up from $190,000 in 2000. Clearly, we have been moving in the wrong direction in connection with our long-range imbalance in recent years. Equally troubling are the long-range fiscal simulations by GAO and others showing that, over the long term, the nation faces large and growing structural deficits in future years due primarily to rising health care costs and known demographic trends.

We're all in this together, sort of

Apparently state Insurance Kommisar Commissioner Mike Kreidler doesn't like the fact that Premera Blue Cross is using surplus revenues from its Washington business to bolster its LifeWise insurance plans in Arizona. LifeWise is a new endeavor offering some of the least expensive individual and group insurance plans in Arizona, and like a lot of new businesses, it needs an infusion of capital.

I guess it's ok for the state to transfer funds amongst accounts and programs in ways that befuddle even the most learned, but heaven forbid a private business use its funds to expand its services to other people.

Back home there's a family that owns two successful grocery stores, each at opposite ends of the state. It's not inconceivable to think they occasionally use surplus revenue from one store for projects in the other, such as expanding the produce section or building a new deli. I wonder if the state Grocery Commissioner will go after them for doing that. Oops, silly me, I just checked and it seems we don't have a Grocery Commissioner. I guess I just assumed the state had a full fledged agency to regulate that industry, too. What was I thinking?

Kreidler's action highlights a major problem in the way states and the federal government regulate health insurance. Right now we can buy car insurance, homeowner insurance, renter insurance, life insurance, and probably any other kind of insurance you can think of, from ANY state in the union. We can go to any place in the country and buy other necessities of life--food, clothing, transportation. For that matter, I can go to some city in Florida I can't even pronounce and hire a contractor to come to WA and build my house.

But you can only buy health insurance from a company in Washington. Period. Rather than promoting the national common good by opening a national market, state insurance regulators have carved out their own little fiefdoms to control who comes hither. Premera Blue Cross is trying to help people in Arizona afford quality health insurance and the state put a stop to it.

Next time you wonder why your health insurance is so expensive, take a look at how many insurance companies are selling plans in Washington. Then go look at how car dealerships will bend over backwards lowering their prices and financing terms to get you to buy from them instead of the 5,000 other dealerships down the road.

The Downward Spiral

A health insurance "mandate" is a requirement that an insurance company or health plan cover (or offer coverage for) common -- but not so common -- health care providers, benefits and patient populations.

This definition of a health care mandate, by the Council for Affordable Health Insurance (CAHI), is drawing notice from policymakers in Olympia who recognize a mandate's effect on a health care plan, but are unsure how to deal with it.

What we are seeing, according to a new CAHI study, is increasing mandates by states:

By the late 1960s, state legislatures had passed only a handful of mandated benefits; today, the Council for Affordable Health Insurance has identified more than 1,900 mandated benefits and providers.

Washington state has 49 mandates, with Minnesota having the most mandates (63) and Idaho the fewest (14). Even though most mandates play a small individual role in the overall cost of a health plan, usually between 1 and 3%, 49 mandates' costs add up quickly. Why do state legislatures continue to tack on mandates? Mostly, because it is tough to oppose any legislation that promises an extra level of care to constituents. Unfortunately, this only exacerbates the problems for those who have trouble either providing insurance for their employees or purchasing it themselves.

A recent op-ed in the Delaware Voice summarizes work in that state to approve a "mandate-lite" health plan that could be made available to small businesses. Much effort has been spent on duplicating these types of plans in Washington state, but to no avail as of yet. There are at least 10 states that already provide for mandate-lite policies. These plans would help get basic, core-benefit health plans to those who need it most -- the uninsured. And shouldn't that be the goal of policymakers?