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Tuesday, August 12, 2003
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In This Issue:
1. Medicare Drug Entitlement Bill Will Be a Huge New Tax Imposed on Working Americans
2. Perspectives on European Health Care: Germany’s Two-Tiered System - The Rich Are Not Taxed
3. Another Insurance Plan Gets it Backwards
4. We Pause for a Moment to Recognize Peter Safar, MD
5. Our Monthly Review of the Twenty Myths of National Health Insurance
6. Medical Gluttony or Excessive HealthCare Costs
7. The MedicalTuesday.Network for Restoring Accountability in HealthCare, Government & Society
The Medicare Drug Entitlement
The Medicare Debate has focused almost exclusively on what form of drug benefit to provide to senior citizens. Lost in the debate is what the huge, new, unfunded liability implicit in the drug legislation would mean to American taxpayers. There are no free lunches, and future taxpayers will have to pick up the commitment to senior citizens. Brian M. Riedl and William W. Beach have published a report to help us appreciate what this means. Americans should consider the fact that the unfunded portions of the Medicare drug bills currently being considered by Congress would cost taxpayers a total of $2 trillion through 2030 alone, with escalating costs thereafter. By 2030, the cost to the average household will be $3,980 per year in higher taxes when combined with Medicare's current $5 trillion projected shortfall through 2030. (The Medicare shortfall is defined as the portion of Medicare spending not covered by payroll taxes and premiums, which must eventually be covered by raising taxes and/or premiums.)
Medicare drug benefit is projected to face
a shortfall of:
* $42 billion in 2010, * $83 billion in 2020 * $148 billion in 2030.
Adding in the projected shortfall of the current
Medicare program, the combined shortfall is:
* $132 billion in 2010, * $276 billion in 2020, * $525 billion in 2030.
Lawmakers who vote for the Medicare drug benefit are voting for a $2 trillion tax increase. Responsible lawmakers who oppose such substantial tax increases should look beyond the 2004 election and examine the burden that a Medicare drug benefit will impose on future generations. Read the entire enlightening report at http://www.heritage.org/Research/HealthCare/bg1673.cfm
Germany’s Two-Tiered System
Robert E. Moffit et al., “Perspectives on the European Health Care Systems: Some Lessons for America,” Heritage Foundation, Lecture No. 711. In Germany’s two-tiered system, about 90 percent of the population pay the tax for insurance through sickness funds. But those whose income is above a certain level are allowed to opt out and use the money to buy private insurance; about ten percent have done so. (See Goodman Myth 15)
Insurance Plan Gets it Backwards
Fast Growing Health Plan has a Catch: $1000-a-year Cap. Low wage employees pay $10 or so weekly for basics and a few extra features. This health insurance policy is among the fastest growing in the workplace. Sold by a half dozen insurance companies, it covers an estimated 750,000 employees and family members. Wal-Mart Stores Inc, McDonald’s Corp and Lowe’s Cox are the major companies making it available to their employees. It costs $16 a week and is capped for basic benefits at $1,000 a year, although, as with most such plans, it lets one collect a few thousand dollars more if you’re injured in an accident or hospitalized. Mrs. Craig, age 61, remembers thinking that she didn’t expect to become seriously ill. Five months later, she learned she had breast cancer. Following surgery and chemotherapy, Mrs. Craig found that she was facing medical bills of $85,000. Since then she and her husband have been paying about $10,000 a year toward their medical debt.
The plans spotlight the growing disparity at many companies between the treatment of higher-ranking employees who get great benefits. They don’t realize that $1,000 is a lot of money to the working poor. However, as with most people, they have neither the knowledge of health care costs or the ability to calculate the actual costs. At $16 a week for 52 weeks, the premium is almost equal to the expected maximum benefits! Our affiliate HealthPlanUSA is estimated to cost little more than the above policy and provide extensive coverage with a unique mechanism to pay the deductible and copayment portion. Market-Based HealthCare will always be a bargain over any cafeteria plan. Even medical personnel are making poor selections in choosing appetizers over the entre.
The Father of CPR & ICU
Peter Safar, MD, who developed the closed chest cardiopulmonary resuscitation techniques (the ABCs of CPR) and established the country’s first physician-staffed, multidisciplinary intensive care unit (ICU), died last week at his home in Pittsburgh at the age of 79. The kindness and generosity that this Professor of Anesthesiology showed me as a first-year pulmonary fellow in the late 1960s, when he came to Sacramento as a visiting professor, was truly an inspiring experience. He gave me the vision to establish the first interdisciplinary Respiratory, Cardiac, Medical and Surgical Intensive Care Unit in suburban Sacramento, where only the major metropolitan hospital had a Cardiac ICU due to its cardiac surgery program. After living on the critical edge of medical advancement to save lives of those too young to die, Dr Safar also showed us how to die: at home with his family away from the ICU to assure him that no one would subject him to CPR to prolong his terminal cancer.
National HealthCare Systems in the English-Speaking
World (No 16)
In his recent update of the “Twenty Myths about National Health Insurance,” John C Goodman, PhD, president of the National Center for Policy Analysis (www.ncpa.org), states that ordinary citizens lack an understanding of the defects of national health insurance and all too often have an idealized view of socialized medicine. For that reason, Goodman and his associates have chosen to present their information in the form of rebuttal to commonly held myths. See previous issues or the archives at www.MedicalTuesday.net for the summary of the first fifteen myths or www.ncpa.org for the original 21 chapters of the book along with the well-annotated references.
Myth Sixteen: Single-Payer Health Insurance Would Benefit Racial Minorities
Critics of the U.S. health care system often point to the disadvantages faced by minorities. On the average, African-Americans and Hispanic-Americans are less likely to have health insurance, see a physician or enter a hospital. But is single-payer health insurance the answer? Empirical studies show that minorities also face discrimination in medicine under systems of non-price rationing. In fact, they often fare worse.
In a market where prices are used to allocate resources, goods and services are rationed by price. Willingness to pay determines which individuals utilize resources, rather than race or political connections. In a nonmarket system, things are very different. Unable to discriminate on the basis of price, suppliers of services must discriminate among potential customers based on other factors. Race and ethnic background are invariably among those factors.
Take the (non-price) rationing of organ transplants, for example. Currently in the United States, no “market” exists for transplant organs. Donated organs are supposedly available on the basis of need rather than the ability-to-pay. Yet, despite the existence of a non-profit organ donor system that supposedly doesn’t discriminate on “ability to pay,” the rate of transplanted organs for minorities is proportionally lower than in whites.
According to the United Network for Organ Sharing:
• Blacks received only 3.7 percent of pancreases despite comprising eight percent of those waiting.
• Blacks received only 14.9 percent of living donor kidneys and 27 percent of cadaveric kidneys despite comprising 34.8 percent of the people on the waiting list.
These disparities in levels of care are confirmed by a study in the Journal of the American Medical Association which found that both blacks - together with the poor - receive a lower percentage of needed transplants than whites and higher-income individuals. There have been very few studies on how racial minorities fare under national health insurance in other countries. However, the few studies that exist, together with surveys and anecdotal evidence, are consistent with what economic theory would predict and show that minorities receive substandard care.
Racial Discrimination in Britain. In Britain, uneven levels of access and treatment for the country’s growing minority population (mostly South Asian) has fueled claims of racism within the NHS. For example:
• According to the British newspaper The Guardian,
a confidential government report and one from an independent think tank
found racism flourishing in the NHS.
• In one case, NHS had accepted an organ donation that was reserved for white-only patients.
• A survey of general practitioners in England found diabetes and asthma programs more common in the mostly-white affluent areas than in the high-minority areas of inner-city London.
• The NHS was also less likely to equip hospitals in London’s minority areas with cervical cancer testing and childhood immunizations.
Racial Discrimination in Canada. Similar problems have been identified with respect to the indigenous minorities in Canada. In a recent study of Canadian Indian groups, researchers found that all the groups sampled had much less access to health care than Caucasians - despite their much greater health needs. For example:
• The infant death rate during the study period
was 13.8 per 1000 live births for Indian infants and 16.3 per 1000 for
Inuit infants, approximately twice the rate (7.3 per 1000) for all Canadian
infants during the same period.
• Overall, Canadian aboriginal people “die earlier than their fellow Canadians and sustain a disproportionate share of the burden of physical disease and mental il1ness.”
Racial Discrimination in New Zealand. In New Zealand’s indigenous Maori population, the average life expectancy for Maori men (68 years) is 5.5 years less than for non-Maori men, and 6 years less for Maori women (73 years) than for non-Maori women. The disparities do not stop with life expectancy, however:
• Many cases of diabetes are largely preventable
or more easily manageable through early intervention and diagnosis. However,
the rate of incidence among 45- to 64-year-old Maoris is four times that
of comparable non-Maoris.
• The incidence of high blood pressure among young (25-44) Maori men and women is almost twice the rate of non-Maori New Zealand men and women of European ancestry.
Racial Discrimination in Australia. Australia also has a significant minority population (the Aborigines). Various studies have reported that:
• Aborigines are three times more likely to die
in infancy than white Australians, and about half of the Aborigine survivors
will die before they reach age 50.
• Of all Aborigines who died between 1995 and 1997, 53 percent of men and 41 percent of women were under 50. By comparison, 13 percent of all other Australian men and 7 percent of all other Australian women who died were under 50. The disparities are a direct result of health care excess inequalities.
• Death rates are higher for Aborigines in all age groups. In infancy, Aborigines are three times more likely to die than other Australians. In the 35-54 age group, they are six to seven times more likely to die than other Australians.
Despite the greater overall health needs of these populations, minorities in countries with single-payer systems of national health insurance are routinely marginalized by systems that focus resources and services on the more affluent, white, urban majority.
Medical Gluttony/Excessive HealthCare Costs
We were receiving approximately three mailings a week from a medical agency about an 83-year-old lady with cardiovascular disease and morbid obesity (Body Mass Index >40). It included weight graphs and a lot of subjective symptom recordings. We thought these reports came from a home health agency that somehow had entered her care obliquely. When the patient came in for her quarterly evaluation, we inquired as to who was doing all this. The patient had assumed that the computer and scales that were delivered to her residence had been ordered by us and so she complied with the daily entries. It turns out that the agency was hired by her insurance carrier to help manage her health and keep her out of the hospital. She already owned a scale that was perfectly adequate to gauge her weight.
Recently, the patient came in with her out-of-town daughter who explained how foolish she felt the program to be. When the agency called her mother about the usual 3- to 4-pound daily weight variations, the daughter observed that her mother would give information she thought the nurse wanted to hear rather than what she observed as her mother’s symptoms. Therefore, this program yielded no useful or even accurate medical information to warrant a computerized scale at premium payers’ expense. In fact, having to wade through as many as 30 pages of superfluous graphs and information in order to get to the more important previous evaluation only interferes with the management of this patient’s medical problems. When I spoke with the program RN, she explained how the computerized weight monitoring was like bringing hospital care into the home and provided valuable information about the patient’s cardiac status. This may be partially true; but, it is usually information that patients give their physicians directly at the time of their office evaluations. In this case, the latter was more accurate.
This is another example of third-party involvement resulting in an increase in health care costs (collecting information unrelated to the doctor’s orders or the patient’s medical needs) and an interference with the smooth delivery of care. The Medical MarketPlace, where every patient and his or her physician are involved in all health care decision, and the cost benefits analysis of any treatment plan would completely eliminate this unnecessary expense. With third-party health care where no body is really in charge, these abuses can go on for an indeterminate amount of time, frequently until accidental discovery, causing a continued leakage of important and precious health care dollars.
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The MedicalTuesday Network Recommends the Following Organizations for Their Efforts in Restoring Accountability in HealthCare, Government and Society:
• The National Center for Policy Analysis, John C Goodman, PhD, President, who along with Devon Herrick wrote Twenty Myths about Single-Payer Health Insurance which we review in this newsletter monthly, issues a weekly Health Policy Digest, a health summary of the full NCPA daily report. You may log onto www.ncpa.org and register to receive one or more of these reports. This week there is a slide presentation concerning the Medicare Prescription Drug Benefits at http://www.womenintheeconomy.org/fcenter/hea/110102/index.
• The Mercatus Center at George Mason University
is a strong advocate for accountability in government. Nobel Laureate
Vernon L Smith, PhD, who has joined the Economics faculty, is currently
visiting Alaska doing a cyberspace study in economics. Please log on at
to read the government accountability reports–their fourth annual Performance
Report Scorecard by author Maurice McTigue, QSO, a Distinguished Visiting
Scholar, a former government minister in New Zealand, and now Director
of the Mercatus Center’s Government Accountability Project.
One of the arguments for single-payer health care is that free care must be provided for the disadvantaged. A current study indicates that the most compelling explanation for the marked shift in the fortunes of the poor is that they continued to respond, as they always had, to the world as they found it, but that we — meaning the not-poor and un-disadvantaged — had changed the rules of their world. Not of our world, just of theirs. The first effect of the new rules was to make it profitable for the poor to behave in the short term in ways that were destructive in the long term. Their second effect was to mask these long-term losses — to subsidize irretrievable mistakes. We tried to provide more for the poor and produced more poor instead. We tried to remove the barriers to escape from poverty, and inadvertently built a trap.
Read the full report at http://www.mercatus.org/pdf/materials/221.pdf.
• The Galen Institute, Grace-Marie Turner President and Founder, has a weekly Health Policy Newsletter to which you may subscribe by logging onto their website at www.galen.org. The politics of Medicare reform become more complex by the day but always are driven by deep and still-unresolved ideological fissures. The question that is always at the center of the debate over health care in this country is whether government or individuals should be in charge of managing resources and decisions. To read this week’s Health Policy Matters, see http://www.galen.org/happenings/080103.html.
• Greg Scandlen, Director of the “Center for Consumer-Driven Health Care” at the Galen Institute, has a Weekly Health News Letter: Consumer Choice Matters. You may subscribe to this informative and well-outlined newsletter that is distributed every Tuesday or read this week’s issues by logging onto www.galen.org and clicking on Consumer Choice Matters archives. This is the flagship publication of Galen's new Center for Consumer-Driven Health Care and is written by its director, Greg Scandlen. The newsletter is dedicated to new developments around the country in the movement toward increased consumerism in health care. It provides an honest evaluation of good and bad ideas and reviews news reports, research papers, press releases and testimony to provide you with source material, including links whenever possible. For the current issue, see http://www.galen.org/happenings/ccm072903.html
• Martin Masse, Director of the Montreal Economic Institute, is the publisher of the webzine: Le Québécois Libre. Please log on at www.quebecoislibre.org/apmasse.htm to review his free market-based articles, some will allow you to brush up on your French. You may also register to receive copies of his webzine on a regular basis. Last week’s message is Government Is the Rule of Black Magic (Part One), an editorial by François-René Rideau. He discusses these Questions: Are there any rational justifications to the existence of government? What can we say of existing explanations that serve as official justifications? In other words: is government the answer to the problems it claims to solve? Not only does it not solve the problems it claims to solve, but it creates these problems to begin with. We must ask: if these explanations are fake, then what is the real reason people believe in government? The battle for freedom is not a battle between people, it is a battle between ideas. Inasmuch as the ideas that currently allow for exploitation to exist are in widespread acceptance, the actual potential for oppression remains just as strong. It is the voluntary servitude, as La Boétie called it, the acceptance of power, that must be fought. The entire editorial is worth reading and digesting. It can be found at http://www.quebecoislibre.org/030719-12.htm.
• The Heritage Foundation, founded in 1973, is a research and educational institute whose mission is to formulate and promote public policies based on the principles of free enterprise, limited government, individual freedom, traditional American values and a strong national defense. The Center for Health Policy Studies supports and does extensive research on health care policy that is readily available at their site, http://www.heritage.org. You may email topics to your friends or receive regular updates.
• The Ludwig von Mises Institute, Lew Rockwell, President, is a rich source of free-market materials, probably the best daily course in economics we’ve seen. If you read these essays on a daily basis, it would probably be equivalent to taking Economics 11 and 51 in college. Please log on at www.mises.org to obtain the foundation’s daily reports. One of the more than 10,000 subscribers writes: "I've been reading the daily articles since you started sending them, and I have to say this is the single most valuable piece of email I get each day -- the one I can be absolutely certain will never be a waste of my time. The Mises Institute contributors offer the most varied, yet consistently brilliant, commentary available, no matter what the topic.” Be sure to read Mises Scholar, William H. Peterson’s America's Greatest Democracy this week. See how Ludwig Mises lit up a near-unknown yet highly effective daily democracy—the marketplace—giving this democracy a critically needed political dimension today. As Mises wrote: "When we call a capitalist society a consumer’s democracy we mean that the power to dispose of the means of production, which belongs to the entrepreneurs and capitalists, can only be acquired by means of the consumers' ballot, held daily in the marketplace." See http://www.mises.org/fullstory.asp?control=1277. You may also log onto Lew’s premier free-market site at www.lewrockwell.com to read some of his lectures to medical groups. To learn how state medicine subsidizes illness see http://www.lewrockwell.com/rockwell/sickness.html.
• CATO. The Cato Institute was founded in 1977 by Edward H. Crane with Charles Koch of Koch Industries. It is a non-profit public policy research foundation headquartered in Washington, D.C. The Institute is named for Cato's Letters, a series of pamphlets that helped lay the philosophical foundation for the American Revolution. The Mission: The Cato Institute seeks to broaden the parameters of public policy debate to allow consideration of the traditional American principles of limited government, individual liberty, free markets and peace. Toward that goal, the Institute strives to achieve greater involvement of the intelligent, concerned lay public in questions of policy and the proper role of government. There are many studies available on various health care issues: http://www.cato.org/healthcare/index.html. Last week Cato celebrated the 91st birthday of Market Icon and Nobel Laureate Milton Friedman. Cato has updated a special site created last year for Friedman's 90th birthday, which included a statement from President Ed Crane, an essay by Thomas Sowell, and clips of the work Friedman has done for Cato. The Cato Institute also begins accepting nominations this week for the 2004 Milton Friedman Prize for Advancing Liberty, won in 2002 by economist Peter Bauer. Please see http://www.cato.org/index.html.
• The Ethan Allen Institute is one of some 41 similar but independent state organizations associated with the State Policy Network. The mission is to put into practice the fundamentals of a free society: individual liberty, private property, competitive free enterprise, limited and frugal government, strong local communities, personal responsibility, and expanded opportunity for human endeavor. Please see http://www.ethanallen.org/index2.html. Click on “links” to see the other 41 free-market organizations throughout the U.S. & Canada including The Montreal Economic Institute at http://www.iedm.org/home_en.htmlwhich is truly an emerging force in the intellectual life of Quebec and Canada. It is important because it is bringing a fresh perspective on the issues this province faces, a new way of thinking about Quebec’s future. Mike Harris states, “As a Premier of Ontario I came to know theInstitute’s high quality work and its reputation for challenging the status quo.”
• Hillsdale College, the premier small liberal arts college in southern Michigan with about 1,200 students, was founded in 1844 with the mission of “educating for liberty.” It is proud of its principled refusal to accept any federal funds, even in the form of student grants and loans, and of its historic policy of non-discrimination and equal opportunity. The price of freedom is never cheap. You may log onto www.hillsdale.edu to register for the annual week-long von Mises Seminars, held every February, or their famous Shavano Institutes. Please log on and register to receive Imprimis, their national speech digest that reaches more than one million readers each month. Read Princeton Professor Robert P George on Freedom and Its Counterfeit at http://www.hillsdale.edu/imprimis/default.htm. The last ten years of Imprimis are archived at http://www.hillsdale.edu/imprimis/archives.htm.
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