Consumer Power Report: How Much Are You Costing Society?

Consumer Power Report: How Much Are You Costing Society?

Benjamin Domenech

Benjamin Domenech (bdomenech@heartland.org) is a senior fellow at The Heartland Institute. Domenech... (read full bio)

A story in the Wall Street Journal caught my attention recently, concerning a taxpayer-funded Centers for Disease Control-backed study on the cost of drinking to society.

Heavy boozers cost the U.S. economy more than $220 billion in 2006 from lost work productivity, increased health care costs and law enforcement, according to a study by the Centers for Disease Control and Prevention.

“Binge drinking also leads to binge spending,” said CDC Director Thomas Frieden on a
teleconference with reporters.

The costs from excessive drinking totaled $1.90 per drink and averaged out to $746 per
person in the U.S., according to the study. Data from 2006 were the most recent available.

Research from 1998 estimated the costs of excessive drinking then at around $185 billion.

Excessive alcohol consumption is defined as averaging more than a drink per day, binge drinking – four or more drinks for women and five or more for men on a single occasion – or any alcohol consumption at all by pregnant women or underage youth.

The research, Frieden said, highlighted the costs incurred by drinkers beyond the damage to their own wallets. About $94.2 billion, or 42%, of the total economic costs were government dollars. Families, mostly through lost household income, bore more than $90 billion in costs.

The CDC press release is here. The study is available here. Now, I have numerous issues to raise about its methodology – but that’s beside the point. It’s clear the CDC is swallowing the World Health Organization’s bogus case for prohibitory laws with this fluffed up calculation. Let’s begin by waiting for the CDC to make the case that states and localities should just give up on the enormous amount of tax dollars accrued from state and local taxes on alcohol – it’s close to $6 billion nationally each year according to the Tax Policy Center – or obtained from sales within places where people typically have more than one drink (for those at the CDC, these are known as “bars”).

Yet there’s something worse going on here, and it’s more dangerous. If the calculations the CDC is promoting here are applied through the private marketplace, they have little effect on the way insurers behave. They’ll ask questions about how much you drink, make an actuarial calculation, and charge you a relevant amount based on how you behave. This is the way it should be.

There’s a contrast, though. Under President Barack Obama’s health care policy approach, determinations like this are taken out of the hands of the private marketplace, and placed instead as a bureaucratic decision within a realm where calculations based on risk are turned into “discrimination.” This means instead of making a decision based on an individual’s behavior and activities within a risk pool, the bureaucratic decisions are made based on the “costs to society.”

Here’s where things get dicey. What government-run health care really does is transition individual vices to community concerns. And if it becomes clear one portion of the pool is becoming particularly costly – because they like to have five beers on gameday, instead of one – then the impetus is for the majority to send a message to these cost-drivers: Shape up, or we’ll make you shape up. And when that happens, things can get ugly – and fast.

-- Benjamin Domenech


IN THIS ISSUE:


VIRGINIA MOVES FORWARD ON HEALTH EXCHANGE

Quickly becoming the primary Republican example of implementation:

The commerce and labor committees of both legislative houses will meet Nov. 15 for a joint briefing by Secretary of Health and Human Resources Bill Hazel, point man on health-care reform for Gov. Bob McDonnell.

McDonnell opposes the Patient Protection and Affordable Care Act signed into law by President Barack Obama last year, but the governor and key legislators want to be sure that the state runs the exchange, not the federal government.

“Virginia can and should set up its own health-care exchange,” said Del. Terry G. Kilgore, R-Scott, chairman of the House Commerce and Labor Committee.

How best to do it remains the question for the legislature, which is waiting for an overdue report by the governor’s Health Care Reform Initiative Advisory Council and a better sense of the deadline for making key decisions under the federal law.

The council delivered the report to the governor and his policy office on Friday, but the administration won’t make it public until transmitting the document to members of the assembly.

McDonnell may include all, some or none of the recommendations as part of legislation that would be necessary to set up the exchange by 2013 so it is ready to begin operating the following year.

Is there any difference here between McDonnell and, say, Gov. Corbett in Pennsylvania?

SOURCE: Richmond Times-Dispatch


JINDAL’S REFORM LESSONS

An excerpt from a National Review feature on Gov. Bobby Jindal – mostly political, but here’s some policy:

Jindal’s careful budget management is reflected in his handling of health care, a complicated topic that vexes many Republican governors. Louisiana’s health-care system dates back to the 18th century, when Catholic religious orders established a tradition of free hospital-based care. Huey Long expanded that through the state-operated charity hospitals; today there are ten. The system predates Medicaid and Medicare, and any Louisianan can walk in and get free health care – if he or she is willing to endure the long wait times.

This model is well represented by Earl K. Long Hospital in Baton Rouge, a run-down monstrosity of a facility that evokes the worst aspects of Soviet architecture. Built in the 1960s, it barely meets reaccreditation standards and was given several extensions and exemptions after Katrina. “Even apart from a dollar perspective, it wasn’t really good for the patients,” Jindal says. “For folks with chronic conditions – diabetes, asthma, high blood pressure – going to an emergency room wasn’t the best way to get your health care. At Earl K. Long, 63 percent of the emergency-room visits are for non-emergency care.”

Replacing Long would have cost the state $400 million; instead the state expanded a nearby urgent-care clinic, and is building on a model used in New Orleans after Katrina, opening and sustaining outpatient clinics that charge patients on an income-based sliding scale, aiming to provide affordable care. (Jindal cites studies that indicate patients are more likely to follow a doctor’s instructions and keep appointments when they pay any portion of the fee, even as little as $1.) Just down the road, the state’s second-largest hospital, the private Our Lady of the Lake, is completing a partnership with Louisiana State University that Jindal’s administration helped shepherd, creating a Level 1 trauma center with a new emergency room the size of two football fields and a nine-story building dedicated to heart and vascular treatment. LSU residents will train at Our Lady of the Lake instead of Earl K. Long. Instead of the $400 million that would have been needed to replace Long, the state is spending $14 million.

SOURCE: National Review Online


STATES LIMIT MEDICAID HOSPITAL STAYS

Pair this with the Obamacare Medicaid expansion and … disaster.

A growing number of states are sharply limiting hospital stays under Medicaid to as few as 10 days a year to control rising costs of the health insurance program for the poor and disabled.

Advocates for the needy and hospital executives say the moves will restrict access to care, force hospitals to absorb more costs and lead to higher charges for privately insured patients.

States defend the actions as a way to balance budgets hammered by the economic downturn and the end of billions of dollars in federal stimulus funds this summer that had helped prop up Medicaid, financed jointly by states and the federal government.

Arizona, which last year stopped covering certain transplants for several months, plans to limit adult Medicaid recipients to 25 days of hospital coverage a year, starting as soon as the end of October. Hawaii plans to cut Medicaid coverage to 10 days a year in April, the fewest of any state.

Both efforts require federal approval, which state officials consider likely because several other states already restrict hospital coverage.

The feds have already endorsed Arizona’s scaled-back program. This is more widespread.

SOURCE: USA Today


VOTE ON MEDICAID EXPANSION THIS WEEK

Not going to go anywhere, but the House is going to vote on the Medicaid for the Middle Class issue this week:

The Medicaid eligibility bill, sponsored by Rep. Diane Black (R-Tenn.), is the last bill on the leader’s weekly schedule. It cuts the deficit by about $13 billion over 10 years and is expected to pass with bipartisan support.

The health law currently counts only the taxable portion of Social Security benefits when calculating Medicaid eligibility, allowing up to a million middle-income early retirees to potentially be eligible for a program meant to help low-income people. Black’s bill would replace the healthcare law’s Modified Adjusted Gross Income (MAGI) with the more restrictive eligibility standard for federal assistance programs.

Black said her bill was a matter of “fairness” during markup in the Ways and Means Committee last week. It cleared the panel 23–12, with Rep. Ron Kind (D-Wis.) voting with Republicans.

Without the change, Black said at the time, the law “could result in individuals whose incomes are up to 425 percent of the poverty level receiving Medicaid. This is unacceptable.”

SOURCE: The Hill


CALIFORNIA MANDATES WILL HIKE PREMIUMS

Gov. Jerry Brown’s new mandates will almost certainly continue the rise of California insurance premiums.

Health insurance plans will be required to provide coverage for children with autism or other developmental disorders under a bill signed into law by Gov. Jerry Brown on Sunday, making California the 28th state to mandate coverage.

Senate President Pro Tem Darrell Steinberg said his bill is needed to make sure physicians can provide medical treatment for autistic children. Insurance providers currently can deny coverage of development disorders because they are classified as an education service.

Brown said Sunday that he had signed the bill despite concerns about its costs. The California bill will require coverage starting in July 2012.

Opponents say SB946 will increase health insurance premiums by millions of dollars just as many people and businesses are struggling to afford their insurance coverage during tight times.

Other critics say the bill discriminates against children who are not covered by private insurance. The bill excludes those covered by Medi-Cal, California’s version of Medicaid, and the state-sponsored Healthy Families insurance plan.

SOURCE: San Francisco Chronicle


MANDATORY CAPS AND MALPRACTICE DAMAGES

Shirley Svorny has an interesting take on this issue:

Supporters of capping court awards for medical malpractice argue that caps will make health care more affordable. It may not be that simple. First, caps on awards may result in some patients not receiving adequate compensation for injuries they suffer as a result of physician negligence. Second, because caps limit physician liability, they can also mute incentives for physicians to reduce the risk of negligent injuries. Supporters of caps counter that this deterrent function of medical malpractice liability is not working anyway – that awards do not track actual damages, and medical malpractice insurance carriers do not translate the threat of liability into incentives that reward high-quality care or penalize errant physicians.

This paper reviews an existing body of work that shows that medical malpractice awards do track actual damages. Furthermore, this paper provides evidence that medical malpractice insurance carriers use various tools to reduce the risk of patient injury, including experience rating of physicians’ malpractice premiums. High-risk physicians face higher malpractice insurance premiums than their less-risky peers. In addition, carriers offer other incentives for physicians to reduce the risk of negligent care: they disseminate information to guide riskmanagement efforts, oversee high-risk practitioners, and monitor providers who offer new procedures where experience is not sufficient to assess risk. On rare occasions, carriers will even deny coverage, which cuts the physician off from an affiliation with most hospitals and health maintenance organizations, and precludes practice entirely in some states.

If the medical malpractice liability insurance industry does indeed protect consumers, then policies that reduce liability or shield physicians from oversight by carriers may harm consumers. In particular, caps on damages would reduce physicians’ and carriers’ incentives to keep track of and reduce practice risk. Laws that shield government- employed physicians from malpractice liability eliminate insurance company oversight of physicians working for government agencies. State-run insurance pools that insure risky practitioners at subsidized prices protect substandard physicians from the discipline that medical malpractice insurers otherwise would impose.

SOURCE: Cato Institute


ROMNEY AND OBAMA REAP BENEFITS FROM INSURERS

An OpenSecrets report on insurance industry donations to Mitt Romney and Barack Obama after their respective health plans went into effect:

Research by the Center for Responsive Politics shows that President Barack Obama and his GOP rival Mitt Romney, the former governor of Massachusetts, are the only two presidential candidates to have raised more than $40,000 from the health insurance industry so far this election cycle …

Both men have favored health care policies that include an individual mandate for people to purchase private insurance plans. Romney did so as governor of Massachusetts, and Obama did so as part of the health care reform package he signed into law last year …

Such mandates are supported by the insurance industry, which stand[s] to benefit from increased customers as well as from government subsidies that help enroll people who could not otherwise afford insurance.

Romney, in fact, has received more than five times as much money from the health insurance industry [as] any other GOP presidential candidate, according to the Center’s research.

SOURCE: OpenSecrets.org


THE HISTORY OF THE INDIVIDUAL MANDATE

James Taranto does us all a service by documenting the true history of the individual mandate, good and bad.

As a junior publicist, we weren’t being paid for our personal opinions. But we are now, so you will be the first to know that when we worked at Heritage, we hated the Heritage plan, especially the individual mandate. “Universal health care” was neither already established nor inevitable, and we thought the foundation had made a serious philosophical and strategic error in accepting rather than disputing the left-liberal notion that the provision of “quality, affordable health care” to everyone was a proper role of government. As to the mandate, we remember reading about it and thinking: “I thought we were supposed to be for freedom.”

The plan was introduced in a 1989 book, “A National Health System for America” by Stuart Butler and Edmund Haislmaier. We seem to have mislaid our copy, and we couldn’t find it online, but we did track down a 1990 Backgrounder and a 1991 lecture by Butler that outline the plan. One of its two major planks, the equalization of tax treatment for individually purchased and employer-provided health insurance, seemed sensible and unobjectionable, at least in principle.

But the other was the mandate, described as a “Health Care Social Contract” and fleshed out in the lecture: “We would include a mandate in our proposal – not a mandate on employers, but a mandate on heads of households – to obtain at least a basic package of health insurance for themselves and their families. That would have to include, by federal law, a catastrophic provision in the form of a stop loss for a family’s total health outlays. It would have to include all members of the family, and it might also include certain very specific services, such as preventive care, well baby visits, and other items.”

The Heritage mandate, at least in theory, would have been less burdensome than the ObamaCare one. You’d have to be covered against catastrophically costly conditions but could choose to buy additional insurance or pay out of pocket for everyday medical needs. On the other hand, Butler’s vague language – “it might also include certain very specific services ... and other items” – would seem to leave the door wide open for limitless expansion.

Whatever the particular differences, the Heritage mandate was indistinguishable in principle from the ObamaCare one. In both cases, the federal government would force individuals to purchase a product from a private company – something that Congress has never done before and that, according to the 11th U.S. Circuit Court of Appeals, exceeds its power under the Constitution’s Commerce Clause.

SOURCE: Wall Street Journal

Benjamin Domenech

Benjamin Domenech (bdomenech@heartland.org) is a senior fellow at The Heartland Institute. Domenech... (read full bio)