ObamaCare!

The state of Virginia’s challenge to ObamaCare is now in federal court. A federal judge has denied the Administration’s request to throw out the suit, finding enough merit in the case to proceed to trial.  Here is an article from the Christian Science Monitor (and see links to a discussion under “Related Stories” on the 14 state lawsuits challenging the constitutionality of the sweeping legislation):  http://www.csmonitor.com/USA/Justice/2010/0802/Judge-refuses-to-block-Virginia-challenge-to-health-care-reform

On Tuesday, 71% of voters in Missouri rejected the idea that the state can force citizens to pay a fine if they do not carry health insurance. This undercuts the law’s enforceability. Missouri  joined five other states that passed similar measures via legislation (Idaho, Utah, Virginia, Georgia and Louisiana). Here is the Wall Street Journal’s Editorial  on Missouri’s vote: http://online.wsj.com/article/SB10001424052748704026204575266472609370944.html?mod=WSJ_hp_mostpop_read

Various legal challenges (legislation, referenda, and law suits) to ObamaCare are active in at least 26 states–not including Minnesota. So far, all Minnesota has is a task force appointed by the governor to study it with a report due in December–we are double checking on this with Twila Brase and other experts, but it appears that Minnesota will not join the fight in 2010.

If the federal legislation is found to be constitutional, state law will be pre-empted by federal law. We think the legal case against ObamaCare is clear but given the history of the federal courts acquiescence to other unconstitutional grabs by Congress, we do not want to count on it.

The creation of the third party payer and welfare system in the last century lead to a market failure and price distortions in health care. We have grown accustomed to varying levels of bureaucratization of the doctor patient relationship via insurance companies or the government; most of us would probably put up with the hassles and paperwork but for the ever increasing price of health insurance and healthcare. Rather than addressing these market failures with some common sense changes, the Democratically controlled Congress has forced through sweeping legislation with absolutely no bi-partisan support amidst wide-spread opposition from the American people. If they could not get Republican Olympia Snow to cross the aisle, something was amiss.

Attorney General Lori Swanson was asked by Governor Pawlenty and members of the Minnesota Senate and House of Representatives to challenge the constitutionality of Obamacare on behalf of the state. Swanson, as expected, rejected those requests. Instead, our attorney general will file a friend of the court brief in support of ObamaCare and against her client–the state of Minnesota—and the now 13 plus states which have declared an interest in challenging the legislation as an encroachment on the sovereignty of the state and We the People.

Attorney General Swanson and others like her, think that Congress has the authority to pass Obamacare. The bill identifies the Commerce Clause (Article I, Section 8 of the U.S. Constitution) as its source of authority. Ever since Roosevelt successfully cowed the U.S. Supreme Court with the threat to “pack it” unless the Court stopped finding New Deal legislation unconstitutional, the Court has allowed Congress to essentially drive a truck and anything else it wants through the Commerce Clause.

But the Supreme Court has recently recognized limits on the Commerce Clause—and even under the broadest interpretation by the Court, it only authorizes Congress to regulate existing commercial activity that affects interstate commerce. The Commerce Clause has never authorized Congress to regulate inactivity or to create the commercial activity it wants to regulate by forcing Americans to buy something (in this case, health insurance). The Commerce Clause was only intended protect and encourage the free flow of goods and services among the states by giving Congress the power to regulate interstate regulations like tariffs and other barriers to trade.

The mandatory insurance requirement is structured as a tax and as with the Commerce Clause, the Court has paid great deference to Congress in reviewing its power to tax. But is the power to tax absolute? Unlimited?
The debate over the constitutionality of ObamaCare points to a crisis. The Constitution as written is a promise to the American people that our government is one of limited powers. When the Constitution was amended in 1791 by the first ten amendments (we call it the Bill of Rights), critics were concerned that enumerating the rights of citizens (free speech, right to bear arms, right to trial by jury, etc) would severely limit citizens to those rights. As a result, the ninth and tenth amendments were added.

The Ninth: The enumeration in the Constitution of certain rights shall not be construed to deny or disparage others retained by the people.

The Tenth: The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.

Unfortunately, these amendments have been largely ignored by the Court and left undeveloped despite their plain language. Now that the federal government has grown exponentially with the blessings of our highest court via vaguely drawn powers, citizens from all walks of life and political persuasion are reacquainting themselves with their Constitution and these two amendments in particular.

The Constitution citizens read and the Constitution the courts and “legal scholars” read are not the same. That is the crisis.

“If there is anything good to say about Democrat control of the White House, Senate and House of Representatives, it’s that their extraordinarily brazen, heavy-handed acts have aroused a level of constitutional interest among the American people that has been dormant for far too long.” –economist Walter E. Williams

“As America’s teetering tower of unkeepable promises grows, so does the weight of government, in taxes and mandates that limit investments and discourage job creation. America’s dynamism, and hence upward social mobility, will slow, as the economy becomes what the party of government wants it to be — increasingly dependent on government-created demand.” –columnist George Will

March 10, 2010   Reconciliation and Congress   New Federal Initiatives Project

Brought to you by the Federalism & Separation of Powers Practice Group

There is a lot of discussion right now about the use of “reconciliation,” a mechanism for enacting legislation to carry out the budget resolution that cannot be filibustered in the Senate, to enable enactment of health care legislation.  As part of our New Federal Initiatives Project, we asked Martin Gold, a partner at Covington & Burling and one of the country’s leading experts on congressional procedures, for a paper discussing the issues that this raises.  The views set out in this paper are his own, not those of the Federalist Society.  For a competing take on these issues, see “Reconciliation for Health Care Should Not Be an Issue” by Stanley Collener, a contributing writer for Roll Call who for most of his career worked on budgetary issues.

–”Reconciliation and Health Care” by Martin Gold, March 10, 2010

–“Reconciliation for Health Care Should Not Be an Issue” By Stan Collender, April 21, 2009, Capital Gains and Games

In his argument, Coburn sites a report by the Governmental Accountability Office claiming that a full 10 percent of Medicaid payments made in 2007 were improper. Medicare fraud estimates range as high as $80 billion, according Kim Brandt, one of Medicare’s anti-fraud specialists.

Coburn also serves on the Senate’s Permanent Subcommittee on Investigations, the same whistleblower committee that found individuals fraudulently using the ID numbers of dead doctors to file false claims, bilking taxpayers of over $90 million. Audits by the committee also found that in four of the nation’s largest states, California, Texas, New York, and Illinois, as much as 40% of home health care expenditures went toward fraudulent claims.

The editorial’s co-author, Harvard’s Dr. Malcolm Sparrow, author of “License to Steal” believes fraud could account for up to 35% of Medicare and Medicaid’s total claims, amounting to hundreds of billions of dollars.

According to the editorial, Medicaid internal inspectors agree that waste fraud and abuse run amok in the system. This sentiment is echoed by Medicare anti-fraud specialist, Kim Brandt saying, “The truth is, no one is sure. All they know is that the more they look the more they find.”

Back in May, Sen. Coburn introduced bi-partisan legislation that seeks to use privare sector entities to identify and prosecute fraudulent claims. Coburn says, “Members of Congress should look to the credit card industry as a model of fraud containment. It processes over $2 trillion in payments every year from 700 million credit cards being used at millions of vendors to buy countless products. Fraud in that industry is one-tenth of one percent while fraud in Medicare and Medicaid as at least 100 times higher.”

Hyperbole aside, there are serious issues being raised by many ordinary citizens about the wide scope and massive changes that Congress and the President are considering making to how Americans receive their health care and how it is paid for.
Here are some stories to consider:

• A blogger with chronic pain considers how her choices for treatment will be curtailed

• From last year, a woman whose Doctor recommended chemotherapy to treat her cancer, gets a letter from the State of Oregon saying it won’t pay for it, that she should consider assisted suicide instead.

Let’s look at Fein’s principles in detail, contrasting them with a free-market health-care system, keeping in mind that the health care system we have today is NOT a free-market system but a heavily regulated managed-care system — single-payer-lite.

Fein’s principles Nos. 1, 2 and 3 define the classic trade-off among access, quality, cost. His first principle of a single-payer system is “automatic enrollment, which would lead to universal coverage.” His second principle is that “benefits ought to be really comprehensive … going from prevention, doctor, hospital, pharmaceuticals, to dental, metal health — all medically necessary services.” Principle three is that “these things should be publically financed.”

Every system — whether a manufacturing system, a sales system, the education system or the health care system — has the same three (and only three) outputs and addresses the same three questions: “How many of what kind at what cost? In health care, those three questions are expressed, “What quality of care (kind) can we provide at what cost to how many people?” Trade-offs are necessary to achieve the optimum (not perfect) system.

In a free-market health-care system, the optimum solution is determined by the pricing mechanism and individual choice. Each of the three variables is truly variable — that is given a market where physicians determine service and price and the individual is responsible for his care costs, a person might choose to have his annual check-up done by a local clinic rather than the Mayo Clinic. Given his family history, his doctor might decide he needs a specific procedure at a different interval than “the average patient.” It is these kinds of individual decisions made by millions of individuals that create an optimum health care system.

‘Variables’ aren’t variable
In Fein’s single-payer model, the “variables” are not variable at all. One of the three variables is fixed (universal coverage); consequently, the other two must be consciously managed from outside the system. Everyone cannot receive comprehensive health care (however “comprehensive” is defined) except at very high cost (or with very high taxes). If costs are fixed (as they must be at some level) then all that remains to be managed is the definition of “comprehensive.” That is why the Obama health plan calls for creation of a third-party board to determine the cost-effectiveness of specific medical treatment for specific classes of people and decide if the treatment will be covered. “Comprehensive” medical care means “quality” medical care is what government says it is, not necessarily what the patient wants.

Whereas in a free-market system millions of medical decisions are made with immediate cost and quality information available to doctors and patients, in a single-payer system, health-care decisions are governed by a relative few individuals necessarily making aggregate assumptions about individual patient situations because they cannot possibly have instant access to data required to make a decision about any individual patient.

That would be “you.”

Trade-offs among access, quality and cost in a health-care system are inevitable even if Fein does not acknowledge them. In a single-payer system with universal coverage, at some point, someone other than you and your doctor will be making decisions that materially dictate and limit treatment options available to you and your family.

Fein’s principle No. 4 is that single-payer eliminates “administrative waste” that results from having multiple payers. His principle No. 5 is that single-payer maximizes choice compared to “our present private insurance system.” Before we can discuss those two principles it is necessary to debunk the misconception Fein implies — that our “present private insurance system” is equivalent to “free-market health care” and that the present managed-care system is the same as a “private health insurance system.”

In free market, patients control the money
In a free-market health-care system, patients control the money that is spent on their health care. That money might be theirs, it might come from an insurance settlement, it might be a health-care voucher by a government program, but in each case, the patient decides how his money will be spent. In turn, in a free-market system, doctors determine what services they will provide and at what price. Doctors compete for individual patients on price and quality of care. Finally, in a free-market health-care system, insurance companies offer policies that meet the differing resources and tolerance for risk of individual consumers. They also have control of products and price. Insurance companies compete for customers based on price and comprehensiveness of coverage.

True health insurance (as opposed to prepaid medical care) has little to do with access to actual medical treatment. Health insurance, like any other insurance product, is concerned with asset protection. The purpose of health insurance is turning unpredictable and unaffordable expense into predictable, affordable expense. Insurance companies offer a variety of policies at different premium levels and deductibles that consumers will buy depending on their needs, resources and tolerance for risk.

In today’s prepaid managed-care system, insurance companies control (via government regulation) which services will be covered and how much physicians will be paid for those services. Even Fein acknowledges that in today’s regulated environment consumer choices are limited. Because a single entity controls both demand and supply of health care, there is no competitive pricing mechanism and consequently no accurate regulator on prices. Cost can’t be controlled if there is no mechanism for determining price and demand at a price.

Three outputs, three questions
Recall that any system has the same three outputs and addresses the same three questions — “How many of what kind at what cost? In a private health-insurance system, those three questions are expressed as “How many policies can be written, covering which situations at what cost?” In the current system, by law, “covering what situation” is mandated. Minnesota has more than 60 insurance mandates requiring specific coverage, for example. When one variable is fixed, the other two must be consciously managed from outside the system. Hence, on top of necessary administrative costs, we get unnecessary administrative costs imposed by regulation.

Because a third party, government, has fixed the extent of coverage, private companies are limited as to the policies they can provide and the price at which they can provide them. To keep costs down, they must either limit service provided or reduce payments to service providers. That does not change with the advent of a single-payer system. A single-payer system is not essentially different from the managed-care system we have today. The only difference is eliminating the regulated private health-care insurers and replacing them with a regimented bureaucracy.

That brings us back to Fein’s single-payer health care principles Nos. 4 and 5: eliminating administrative waste and maximizing choice.

I’ll forgo arguing with Fein’s statistics on administration costs other than to say determining administrative cost depends a lot on what is included as “administration” and what isn’t, and Fein’s numbers are based on some fairly biased assumptions — as would be my assumptions to the contrary. However, the fundamental irony, as the Cato Institute’s Michael Tanner points out, is that folks like Fein praise one of the greatest failings of socialized medicine, lack of administration, as if it were a virtue.

Administration is key
Economist Tyler Cowen notes administrative costs like monitoring, marketing and overhead costs of private insurance companies are what enable those companies to offer coverage for expensive medical treatments. Competing insurance companies spend money evaluating claims and setting pricing structures so that there is an accurate measure of what coverage actually costs relative to need. Without that review mechanism, it is impossible to limit health-care costs without reducing service. Without the consulting function of insurance agents, individuals will either buy more coverage than they need and pay more for it than they should, or find themselves underinsured and taking on more financial risk than warranted.

Tanner adds, “If European health-care systems appear to have lower administrative costs, it is because, rather than scrutinizing claims, they limit the overall amount they will spend on medical services. Of course, that just means they shift costs to patients who either must pay for medical services themselves, or deal with the costs of waiting.” Going back to the access, quality, cost triumvirate, if claims are not reviewed then cost must be shifted or care limited, or “administrative saving” or the consequences of lax oversight must be passed to taxpayers.

In his principle No. 5, as he did with the definition of “comprehensive,” Fein obscures the concept of “choice” in health care. “The program in the country with the most choice is Medicare,” he writes. “You have the choice of physician, a choice of hospital; so, again, single payer would lead to increased choice.”

Indeed, as Fein envisions single-payer, it would lead to increased choice compared to today’s system. But remember, the system we have today is not a free market system, which by definition requires that patients control their health care dollars and choose their own physicians and by extension hospitals and other treatment facilities. The system we have today, thanks to government regulation, is a managed care system where different costs for “in-network” and “out-of-network” care are unavoidable because doctors are competing for pools of patients provided by health plans based on how little reimbursement they will take; doctors are not competing for patients based on value to the patient.

However, what Fein calls “choice” turns out to be anything but, as his principle No. 6 illustrates.

In his sixth principle, Fein again tries to reassure with the idea that a single-payer system really delivers health care through a “nonprofit, privately controlled system.” Doctors, he says, “would not be employed by the government; hospitals would not be owned by the government. What you would have is public financing and collection of money by the single payer, but the private delivery system would continue.”

Sort of like General Motors, I guess.

Choice, but not much of a choice
What Fein doesn’t make clear is that while patients in a single-payer system might choose from among private doctors and private hospitals, there will be little difference among doctors and hospitals in the procedures and treatments they are allowed to perform. There is a big difference between choosing among McDonald’s, Burger King and Subway (a free market) and “choosing” any (but only) McDonald’s. Again, in a single-payer system at some level, medical choices for the individual must be made by a third party based on aggregate rather than individual considerations — you just can’t get “a flame-broil Whopper Jr. for a buck” at Subway.

A second point Fein ignores in his choice argument is that with a single-payer system there is little to no motivation to innovate. Using Fein’s Medicare analogy, the single-payer determines both service descriptions and reimbursement rates. Innovations, by the definition of “innovation,” are not in the system. Medical innovations by their nature are, in initial stages, very expensive, and until perfected, produce unpredictable results. Where is the motivation to innovate if a) one must buck the system at one’s own expense to put the procedure on the service schedule, and b) one will be able to price the innovation to compensate for developing it.

Removing the profit motive stifles innovation; that reduces choice, it does not increase it.

Concluding, Fein provides us with the single-payer analogy of Medicare for all. “So what we talk about is Medicare 2.0,” he writes, “an expanded program of Medicare for all and an improved program that deals with many of these other programs. That would be the way a single-payer program would operate in the United States.”

OK, let’s assume Medicare provides “comprehensive” medical care at affordable cost (a debatable point). Why is that so? It is because the private health-care market picks up the tab for subsidized, below-market Medicare patient care; non-Medicare patients pay much more for the same services. When you extend Medicare to everyone, who is left to pick up the slack?

The dirty little secret today is that increasing numbers of physicians are simply not taking new Medicare patients. They continue to provide care as their patients age into Medicare, but the reimbursement rates for Medicare are so low that private physicians simply cannot afford to take on new Medicare patients. We’re not talking the ever-available criticism of “greed.” We are talking government reimbursements that are so low that they do not cover the cost of treatment and overhead, let alone any expectation of profit.

This situation points out another consequence of a single-payer system that Fein ignores: A Medicare-for-all scenario necessarily requires a nonvoluntary requirement on physicians to provide care irrespective of their own interests. The individual sovereignty of health-care providers, an unalienable right, must be sacrificed for the manufactured “right to health care.” As must the patient’s unalienable right to make his own health-care decisions.

Trade-offs would be imposed from on high
In his MinnPost interview, Fein has given us a clear picture of a single-payer system. What he has not offered is the trade-offs such a system must necessarily impose from on high by boards and bureaucrats, unlike in a free-market health care system where trade-offs are determined by individuals and their doctors. A single-payer system is a classic example of the dichotomy between freedom and perfection: A free society can never be perfect; a perfect society can never be free. The ultimate trade-off offered by a single-payment health care system is between the unfulfillable promise of perfection and the frustration of imperfection engendered by individual freedom.

In a true free-market system, not the heavily regulated managed-care health-care system we have today, individuals and their doctors decide how trade-offs will be made based on their individual situations. In a single-payer system, third-party government boards must necessarily make cost-based decisions about individual medical care based only on aggregate data. A free-market health-care system encourages innovation because innovators reap the rewards of their effort; a single-payer system discourages innovation because the system doesn’t know how to value innovation. A free-market health-care system establishes an optimum (not perfect) relationship among access, quality and cost; a single-payer system providing universal coverage distorts market signals by the necessity to system control costs, and consequently misallocates costs and redefines “quality.”

Ultimately the question that the public must answer vis-à-vis single payer health care is “Who do you want making decisions about health care for you and your family — you and your doctor, or somebody else?

Craig Westover, a senior policy fellow with the Minnesota Free Market Institute, is a contributing columnist to the Pioneer Press Opinion Page and a contributor to MinnPost.

This piece originally appeared at MinnPost.Com — COMMUNITY VOICES | THU, JUN 25 2009 7:00 AM

And there’s more than just 800 billion dollars of spending to grow government. There is a wealth of new programs, expanding government and eroding our freedoms in this new piece of legislation.  It creates new avenues of dependency and strips away our rights to privacy by growing the welfare state and bringing us socialized medicine through the back door.  To read more about how the Stimulus bill reverses the 1996 welfare reform read “Stimulus Bill Abolishes Welfare Reform and Adds New Welfare Spending” by Robert E. Rector and Katherine Bradley at the Heritage Foundation.  The healthcare portion of the bill alone should be a shocker for conservatives of all stripes and it’s worth taking a serious look at.

A new partial subsidy for COBRA coverage is part of the bill. (COBRA is the federal law under which unemployed workers are allowed to buy into their previous employer’s health plan.)  Since they are paying both their own and what the employer’s contribution was formerly, many workers do not opt for COBRA due to the expense.  If COBRA were a worker’s only option for insurance this might make some kind of sense but it isn’t.  Most workers can qualify for other plans that better suit their needs and have costs that are aligned to their expenses.  By subsidizing what may be an unemployed person’s LEAST COST EFFECTIVE health insurance choice, the federal government is now underwriting group health insurance plans, with varying levels of coverage and cost at the expense of taxpaying employers and workers. This  further burdens them and increases the likelihood of more layoffs and more employers going out of business.  Yes, it’s entirely possible that you could have your employer benefits cut or lose them entirely so that somebody else can “afford” their Cadillac healthcare plan.

The House bill expands Medicare to the unemployed.  Medicare has been expanded many times in recent years and together with the expansion of S-CHIP, which was originally intended to cover children in poverty, we are fast coming to the point where everyone qualifies for federally funded healthcare under one mandate or another.  Once enough people fall under these mandates we will see employers finding ways to jettison health insurance coverage.  If the Feds will pay for it, why should they?

And let’s not forget that what the government spends money on, it controls.  Both versions of the stimulus bill have measures that establish programs to fund “comparative effectiveness research”.  There is even a “Federal Coordinating Council for Comparative Effectiveness Research” whose purpose is to mandate what treatment will or won’t be given.   The House Committee Report states “those [items] that are found to be less effective and in some cases, more expensive, will no longer be prescribed.”  A clearer statement that the Federal government will be deciding what treatment you will receive could not have been made.   Good luck to you if what works for most people doesn’t work for you.

It shouldn’t surprise anyone that the new administration thinks that it knows what’s best for us in healthcare.   President Obama’s  appointee for Health and Human Services Secretary (before he was bounced for  non-payment of his own personal income taxes)  former Senator Tom Daschle wrote a book published last year  entitled “Critical: What We Can Do About the Health-Care Crisis.”  In it, Daschle unleashes such gems as doctors need to “learn to operate less like solo practitioners.”  He wants us to forgo expensive treatments and not to expect medical progress to continue to advance because it’s driving up costs.   Forget about quality of life enhancing treatments if you are a senior citizen.  Daschle thinks that you should learn to embrace old age like the Europeans do.  In the United Kingdom, a government board approves or rejects treatments using a formula which includes the age of the patient. Treatments for younger patients are approved more often than treatments for diseases that primarily affect the elderly.  That’s pretty much the same thing as saying “suck it up seniors, you’re on your way out anyway!”  What’s cost effective for you and what’s cost effective for the government could wind up two very different things and with the government controlling the entire system, you’d be out of luck.

The Health Information technology portions of the bills are also chilling for anyone who cares about their privacy and the right to control who has access to their health data.  In order to conduct research on what treatments are effective, widespread use of patient information will be necessary.  And no longer would you simply be an anonymous data-point.  The government will track you, your treatment and your doctor in order to mandate the compliance that will be required with treatment standards. Currently, for hospitals to use your private information, you must give your consent, but what if the Federal government mandates your consent to use your personal information in order for you to be treated?

Once the Federal government controls the entire healthcare system, from payment to treatment, we’ll have no choice.