Medicare Review

Current Issue

In Government medicine, there is a perverse incentive to be uninsured "free riders."

As we move into the 21st century, it is clear that we are living with a number of institutions that were not designed for the Information Age. One of these institutions is our health care system.

Characteristics of an Ideal Health Care System

By John C. Goodman, President

National Center for Policy Analysis

NCPA Policy Report No. 242

Web site: www.ncpa.org/studies/s242/s242.html

Why should government be involved at all in our health care system? Aside from providing care for low-income families, the most persuasive argument is that in the absence of coercion people will have an incentive to be uninsured “free riders.” In our society, people who choose not to pay for insurance know that they are likely to get health care anyway — even if they can’t pay for it. The reason is that there is a tacit, widely shared agreement that no one will be allowed to go without care. As a result, the willfully uninsured impose external costs on others — through the higher taxes or higher prices which subsidize the cost of their care.

What evidence is there that free riders are a problem? One piece of evidence is the number of uninsured:

According to the Census Bureau, in 1999 there were 42.6 million people who were uninsured at any one time, a larger percentage of the population than a decade ago.
The rise in the number of uninsured has occurred during a time when per capita income and wealth, however measured, have been rising.

Although it is common to think of the uninsured as having low incomes, many families who lack insurance are solidly middle class. And the largest increase in the number of uninsured in recent years has occurred among higher-income families:

About one in seven uninsured persons lives in a family with an income between $50,000 and $75,000, and almost one in six earns more than $75,000.
Further, between 1993 and 1999, the bulk of the increase in the number of uninsured was among the households earning more than $50,000.
By contrast, in households earning less than $50,000 the number of uninsured decreased by about 5 percent.

In deciding to be uninsured by choice, many healthy individuals are undoubtedly responding to perverse incentives created by government policies.

On the one hand, we make an enormous amount of free care available to the uninsured; in Texas, for example, it totals $1,000 per uninsured person every year, on the average.
Also, federal and state laws are making it increasingly easy for people to obtain insurance after they get sick — thus removing the incentive to buy insurance when they are healthy.
Finally, although the federal government generously subsidizes employer-provided insurance, most of the uninsured are not eligible for an employer plan, and they get virtually no tax relief when they buy insurance on their own.

Far from solving the free rider problem, most government interventions these days are making the problem worse. Indeed, we might be better off under a policy of laissez faire.

If we accept the free rider argument, however, what policy implications logically follow from it? One commonly proposed solution is to have government require people to purchase insurance. However, this is neither necessary nor sufficient. Instead, a complete solution would have 10 characteristics. Adhering to each of them would lead to a system that provides a reasonable form of universal coverage for everyone without adding to national health care spending and without intrusive and unenforceable government mandates. . .

To read Dr. Goodman’s Ten Recommendations, go to . . . .

“People who fail to insure are likely to get health care anyway — even if they can’t pay for it.”

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Government is not the solution to our problems, government is the problem.

- Ronald Reagan

Medicare Review

Previous Issue

A Digital Shift on Health Data Swells Profits in an Industry

It was a tantalizing pitch: come get a piece of a $19 billion government “giveaway.”

By JULIE CRESWELL, NYT

But today, as doctors and hospitals struggle to make new records systems work, the clear winners are big companies like Allscripts that lobbied for that legislation and pushed aside smaller competitors.

While proponents say new record-keeping technologies will one day reduce costs and improve care, profits and sales are soaring now across the records industry. At Allscripts, annual sales have more than doubled from $548 million in 2009 to an estimated $1.44 billion last year, partly reflecting daring acquisitions made on the bet that the legislation would be a boon for the industry. At the Cerner Corporation of Kansas City, Mo., sales rose 60 percent during that period. With money pouring in, top executives are enjoying Wall Street-style paydays.

None of that would have happened without the health records legislation that was included in the 2009 economic stimulus bill — and the lobbying that helped produce it. Along the way, the records industry made hundreds of thousands of dollars of political contributions to both Democrats and Republicans. In some cases, the ties went deeper. Glen E. Tullman, until recently the chief executive of Allscripts, was health technology adviser to the 2008 Obama campaign. As C.E.O. of Allscripts, he visited the White House no fewer than seven times after President Obama took office in 2009, according to White House records.

Mr. Tullman, who left Allscripts late last year after a boardroom power struggle, characterized his activities in Washington as an attempt to educate lawmakers and the administration.

“We really haven’t done any lobbying,” Mr. Tullman said in an interview. “I think it’s very common with every administration that when they want to talk about the automotive industry, they convene automotive executives, and when they want to talk about the Internet, they convene Internet executives.”

Between 2008 and 2012, a time of intense lobbying in the area around the passage of the legislation and how the rules for government incentives would be shaped, Mr. Tullman personally made $225,000 in political contributions. While tens of thousands of those dollars went to the Democratic Senatorial Campaign Committee, money was also being sprinkled toward Senator Max Baucus, the Democratic senator from Montana who is chairman of the Senate Finance Committee, and Jay D. Rockefeller, the Democrat from West Virginia who heads the Commerce Committee. Mr. Tullman said his recent personal contributions to various politicians had largely been driven by his interest in supporting President Obama and in seeing his re-election.

Cerner’s lobbying dollars doubled to nearly $400,000 between 2006 and last year, according to the Center for Responsive Politics. While its political action committee contributed a little to some Democrats in 2008, including Senator Baucus, its contributions last year went almost entirely to Republicans, with a large amount going to the Mitt Romney campaign.

Current and former industry executives say that big digital records companies like Cerner, Allscripts and Epic Systems of Verona, Wis., have reaped enormous rewards because of the legislation they pushed for. “Nothing that these companies did in my eyes was spectacular,” said John Gomez, the former head of technology at Allscripts. “They grew as a result of government incentives.”

Executives at smaller records companies say the legislation cemented the established companies’ leading positions in the field, making it difficult for others to break into the business and innovate. Until the 2009 legislation, growth at the leading records firms was steady; since then, it has been explosive. Annual sales growth at Cerner, for instance, has doubled to 20 percent from 10 percent.

“We called it the Sunny von Bülow bill. These companies that should have been dead were being put on machines and kept alive for another few years,” said Jonathan Bush, co-founder of the cloud-based firm Athena health and a first cousin to former President George W. Bush. “The biggest players drew this incredible huddle around the rule-makers and the rules are ridiculously favorable to these companies and ridiculously unfavorable to society.” See below . . .

Read the entire article at the NY Times . . .

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Government is not the solution to our problems, government is the problem.

- Ronald Reagan

Medicare Review

Past Issue

Raise the Retirement and Social Security Age to 70?

CEOs’ proposal: Raise retirement age to 70

January 17, 2013, 1:47 PM

By Matthew Heimer

In the endless-loop battle over the federal deficit, whether and how to reduce spending on Social Security and Medicare remains one of the most combustible topics. The Business Roundtable, a group of more than 170 of the nation’s chief executives, has now spelled out its own stance on entitlement reform, and its headline proposal is: Americans need to wait longer for retirement benefits. Most notably, the group advocates raising the Medicare and Social Security eligibility ages to 70, up from the current 65 for Medicare and 66 or 67 for full benefits for Social Security.

The organization unveiled its position in an editorial in the Wall Street Journal yesterday by Gary Loveman, the CEO of Caesar’s Entertainment. The magic number 70 wasn’t in the editorial, but it appears in the more detailed version of the proposals on the Business Roundtable website. The roundtable also backed means-testing of entitlement benefits; creating private-sector competition for Medicare; and using the so-called chained CPI to slow the annual inflation adjusted growth of Social Security payouts. The group doesn’t specify a timetable for phasing in these reforms, and consequently it doesn’t try to estimate how much they would save, but none would apply to anyone who’s currently 55 or older. (Incidentally, the median age of CEOs of S&P 500 companies is…55.)

The proposal to turn 70 into the new 65 is a shoot-the-moon expansion of the parameters of the entitlement debate. During the fiscal-cliff negotiations, the White House briefly signaled a willingness to hike the Medicare eligibility age to 67, only to take the proposal off the table. In the eyes of some critics, increasing the Medicare threshold ignores both medical realities and the hard facts of the job market. Many surveys show that most Americans would prefer to keep working to 70, or beyond. But according to the Center for Retirement Research at Boston College, in practice the average man retires by age 64, the average woman by age 62. For many, poor health is a factor in their decision to leave the workforce as early as they do; others leave the workforce involuntarily after layoffs.

http://blogs.marketwatch.com/encore/2013/01/17/ceos-proposal-raise-retirement-age-to-70/