Sunday, July 8, 2012

Obamacare RIP: John Roberts Cannot Save You

Peter Ferrara
Progressives are desperate to prevent the country from learning that free market conservatives have long been proposing policies to assure essential health care for all, and achieve all the other goals of Obamacare, at just a small fraction of the costs. That involves a health care safety net ensuring that no one would suffer from lack of essential health care, with no individual mandate and no employer mandate, achieving that goal far more effectively than Obamacare. And it involves market incentives and competition to control costs far more effectively than, indeed contrary to, Obamacare.

The best exposition of those policies can be found in the latest book by John Goodman, Priceless: Curing the Health Care Crisis, just published by the Independent Institute. Goodman is the Godfather of Health Savings Accounts (HSAs), and President of the National Center for Policy Analysis in Dallas.

The safety net reforms begin with Medicaid, the health care program for the poor costing roughly $500 billion a year now in federal and state spending, and growing like Jack’s beanstalk. Despite all that spending, Medicaid pays doctors and hospitals only 60% or less of costs for their health services to the poor. Consequently, the poor on Medicaid face grave difficulties in obtaining timely and essential health care, and suffer worse health outcomes as a result. As Scott Gottlieb of the New York University School of Medicine explains in a March 10, 2011 commentary in the Wall Street Journal (“Medicaid Is Worse Than No Coverage at All”), “Dozens of recent medical studies show that Medicaid patients suffer for it. In some cases, they’d do just as well without health insurance.”

Gottlieb reports that a 2010 study of throat cancer “found that Medicaid patients and people lacking any health insurance were both 50% more likely to die when compared with privately insured patients.” A 2011 study of heart patients “found that people with Medicaid who underwent coronary angioplasty were 59% more likely to have…strokes and heart attacks, compared with privately insured patients. Medicaid patients were also more than twice as likely to have a major, subsequent heart attack after angioplasty as were patients who didn’t have any health insurance at all.” A 2010 study of major surgical procedures “found that being on Medicaid was associated with the longest length of stay, the most total hospital costs, and the highest risk of death.

The deathly problem was illustrated by the case of 12 year old Deamonte Driver, from a poor Maryland family on Medicaid. When Deamonte complained of a toothache, his mother tried to find a dentist who would take Medicaid. But only 900 out of 5,500 dentists in Maryland do. By the time she found one, and got the boy to the appointment, his tooth had abscessed, and the infection had spread to his brain. Now she needed to find a brain specialist who took Medicaid. Before she could find one, the boy was rushed to Children’s Hospital for emergency surgery. He called his mother from his hospital room one night to say, “Make sure you pray before you go to sleep.” In the morning, he was dead.

Medicaid today is consequently just an institutionalized means for denying health care to the poor by refusing to pay doctors and hospitals sufficiently to assure their timely access to essential health care.

The entire problem can be solved by extending to Medicaid the enormously successful, bipartisan 1996 welfare reforms of the old, New Deal, Aid to Families with Dependent Children (AFDC) program. That reform returned the share of federal spending on AFDC to each state in the form of a “block grant” to be used in a new welfare program redesigned by the state based on mandatory work for the able bodied. Like Medicaid, federal funding for AFDC previously was based on a matching formula, with the federal government giving more to each state the more it spent on the program, effectively paying the states to spend more. The key to the 1996 reforms was that the block grants to each state were finite, not matching, so the federal funding did not vary with the amount the state spent. If a state’s new program cost more, the state had to pay the extra costs itself. If the program cost less, the state could keep the savings.

The reform was shockingly successful, with two-thirds leaving the program for work within 10 years. Their incomes consequently increased by 25%, while costs to taxpayers declined by 50% after 10 years from where they would have been otherwise.

With the same block grants applied to Medicaid, the states could then each choose to use the funds to provide assistance to the poor to buy the private health insurance of their choice. The voters of each state would decide how much assistance to provide each family at different income levels to assure that the poor would be able to obtain adequate health insurance. This would rightly vary with the different income and cost levels of each state. The poor would then be free to choose the private health insurance they preferred, including Health Savings Accounts, liberating them from the Medicaid ghetto. The poor would enjoy the same health care as the middle class, because they would have the same market health insurance as the middle class.

A second step necessary to ensure a complete safety net is to allow each state to use part of their Medicaid block grant to set up a High Risk pool. Those uninsured who become too sick to purchase health insurance in the market, perhaps because they have contracted cancer or heart disease, for example, would be assured of guaranteed coverage through the risk pool. They would be charged a premium for this coverage based on their ability to pay, ensuring that they will not be asked to pay more than they could afford. Federal and state funding would cover remaining costs. Such risk pools already exist in over 30 states, and for the most part they work well at relatively little cost to the taxpayers because few people actually become truly uninsurable.

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