Election on Tuesday: Who’s Running?

9845970_SI’ve commented before on all the political spam I’m receiving in my email, most of it from the Democratic party (dccc@dccc.org). In many of their pleadings, they claim they are running against the Koch Brothers. (I like how they capitalize both their name and the B in Brothers.) And who’s running against the Koch Brothers? It appears that Hillary Clinton is.

In a recent email with the subject line “Accept Defeat” (which I’m already doing, because I don’t think I’ll feel like a winner no matter how the election turns out on Tuesday), the first line is, “We are completely out of ideas.” OK. But if you’re out of ideas, why would I want to support you?

A few lines later they tell me, “The Koch Brothers are pummeling us...” and here, I didn’t even know they were running. This email refers to an earlier email from Hillary Clinton. (I’m name-dropping here, trying to impress you with the fact that I get email from Hillary. It appears we are on a first-name basis.) The email goes on to say, “...it doesn’t even look like Hillary Clinton’s email can dig us out of this hole.”

Nobody else is mentioned in the email. It appears the Democratic Congressional Campaign Committee is trying to tell me the election is between the Koch Brothers and Hillary Clinton. When I vote next Tuesday (many libertarians will criticize me for doing this), I’ll be looking for these names on the ballot.

My direct complaint about this email is a small one, I’ll admit, but the larger lesson in the email is that political battles are more about pulling the emotional levers of voters than talking about issues, or even about candidates. If I gave them money, as they are requesting, what would happen to that money? How would it be spent? Their solicitation tries to push me to give only if I want to support Hillary or beat the Koch Brothers.

Messages like this must work, or they wouldn’t keep sending them. Surely they’ve done the research to know which messages are effective. And if this is the type of message that works, it makes me very uneasy about giving any responsibility for my well-being to the will of the majority, regardless of whether the majority decides to vote for the Koch Brothers or for Hillary Clinton.

Government Buries Evidence of Poor Access to Care under Obamacare

imagesThank providence for USA Today, which has given us yet another story describing how poor access to health care is under Obamacare.

People who fell for navigators’ sales pitches and signed up for Obamacare are discovering that it is junk insurance:

“The exchanges have become very much like Medicaid,” says Andrew Kleinman, a plastic surgeon and president of the Medical Society of the State of New York. “Physicians who are in solo practices have to be careful to not take too many patients reimbursed at lower rates or they’re not going to be in business very long.”

Kleinman says his members complain that reimbursement rates can be 50 percent lower than commercial plans.

“I definitely feel like a bad person who is leeching off the system when I call the doctors’ offices,” she says. Shawn Smith of Seymour, Ind., spent about five months trying to find a primary care doctor on the network who would take her with a new, subsidized silver-level ACA insurance plan.

Note: This person had a silver plan, not a bargain-basement bronze plan.

The Obama Administration, on the other hand, is doing whatever it can to avoid exposing these stories. When Obamacare was passed, its supporters made a big show about how the new law would force health insurers to be “transparent” about coverage. Transparency was even regulated!

At least, it was regulated—until now, when people might value some information about that which they are forced to buy for next year’s enrollment:

With health insurance marketplaces about to open for 2015 enrollment, the Obama administration has told insurance companies that it will delay requirements for them to disclose data on the number of people enrolled, the number of claims denied and the costs to consumers for specific services.

For months, insurers have been asking the administration if they had to comply with two sections of the Affordable Care Act that require “transparency in coverage.”

In a bulletin sent to insurers last week, the administration said, “We do not intend to enforce the transparency requirements until we provide further guidance.” (Robert Pear, The New York Times)

Well, I suppose that if people cannot get an appointment with a physician, it is pretty hard to disclose how much their treatment cost.

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For the pivotal alternative to Obamacare, please see the Independent Institute’s widely acclaimed book: Priceless: Curing the Healthcare Crisis, by John C. Goodman.

Distorted Education Attack Ads Hide the Facts

SchoolPolitical campaigns across the country are heating up—thanks in no small part to all the hot air surrounding accusations about alleged “cuts” to education funding. As I explain in a recent USA Today column:

In North Carolina, Democratic Sen. Kay Hagan has been savaging her opponent, Republican N.C. House Speaker Thom Tillis, for allegedly cutting $500 million from the state’s education budget.

In the Wisconsin governor’s race, Republican Gov. Scott Walker is being attacked by challenger Mary Burke for allegedly engineering “the largest cuts to K-12 education funding in the history of our state.” In other races, the story is the same: more money is better; cuts (usually reductions in proposed increases) are seen as bad.

The reality is, average per-pupil funding nationwide exceeds $12,000, but only about 54 percent of that amount funds what’s broadly considered instruction. The rest goes toward administration, food service, capital projects, and debt.

What’s more, spending varies widely from state to state. Per-pupil funding ranges between less than $8,000 in Utah and Idaho, yet skyrockets past $28,000 per pupil in top-spender DC.

If the rationale behind the political ad campaigns were true, students in top spending states would outperform those in cellar-dweller spending states—but that’s not the case:

Moreover, according to the National Assessment of Educational Progress, average NAEP reading and math performance levels among low-income students (those who qualify for the national school lunch program) are virtually identical in the top- and bottom-spending states. In both cases they’re abysmal, with just one of five low-income students proficient in reading at both the fourth- and eighth-grade levels. In math, one in four low-income fourth-graders tests proficient (at both the highest and lowest spending levels), while even fewer eighth-graders are proficient—18% in the bottom-spending states, 20% in the top-spending states.

The question voters should be asking this election season isn’t which candidates promise to spend the most on education, but which ones will direct taxpayer funds to programs that actually improve student learning.

Parental choice programs empower parents to choose their children’s schools and have the best track records at improving student outcomes, including higher academic performance and graduation rates.

What’s more, because these programs cut out the hefty government middleman, they don’t have the biggest price tag, either.

Airline Deregulation Act of 1978

2958611_SPresident Jimmy Carter signed the Airline Deregulation Act on October 24, 1978. That law phased out the Civil Aeronautics Board (CAB) over the next four years, ending five decades of federal regulation of passenger airfares on interstate commercial flights and entry into the airline industry. One of prime movers behind this first legislative initiative to deregulate a major U.S. industry was Alfred Kahn, a respected academic specialist in the economics of regulation from Cornell University’s faculty, then serving as the CAB’s chairman.

Ostensibly intended to protect the flying public against excessive ticket prices, the CAB did no such thing. Evidence began accumulating in the late 1960s and early 1970s that airfares on regulated interstate flights were in fact considerably higher than the fares charged on routes covering the same distance on flights departing and landing within the same state (e.g., California’s Pacific Southwest Airlines, the forerunner of today’s Southwest Airlines), which were not subject to federal regulatory controls.

Moreover, as reported by Nobel laureate George Stigler, in his famous 1971 article published in the Bell Journal of Economics and Management Science (“The Economic Theory of Regulation”), throughout its history, the CAB never saw fit to authorize the entry of any new commercial airline. In consequence, owing to mergers and consolidations of route networks over time, fewer U.S. airlines were flying the skies in 1970 than had been operating when the CAB was created in 1938.

The commercial airline industry thus stood front and center as an example of Stigler’s “capture theory” of regulation, which teaches that, far from being thrust upon unwilling firms to protect the public’s interest, regulation is acquired by and operated in the interest of the regulated industry itself.

As pointed out by other economists, including George W. Douglas, James C. Miller III and Thomas Gale Moore, a fly landed on the regulatory ointment. Because of federal regulation, the airlines could not compete for passengers by cutting airfares below the minimums prescribed by the CAB. (Those minimum airfares were set for the twin purposes of safeguarding the interests of consumers and of guaranteeing that the airlines’ owners earned “reasonable” rates of return on their investments.)

Non-price competition eventually eroded the airlines’ regulatory profits. Each airline sought to increase the number of passengers carried on scheduled flights relative to rivals by offering sumptuous meals (even to those flying “coach) and hired well-known chefs to oversee in-flight meal services. They hired attractive young women as stewardesses, outfitted them with uniforms designed by notable couturiers (readers of a certain age will remember Braniff Airlines’ “When you got it, flaunt it” advertising campaign featuring “stews” in hot pants), superannuated them on their 30th birthdays, and put them on notice that personnel actions would be taken if they gained too much weight.

But the most salient cost-raising aspect of non-price airline competition was the incentive to offer passengers, especially business travelers, a variety of convenient departure and arrival times between major cities. Doing so required purchasing more aircraft and hiring more pilots and other aircrew members. The upshot was that only half of the seats on a typical flight were filled (a 50 percent “load factor,” in airline jargon).

Towards the end and recognizing that the CAB could not protect their profits, the airlines asked to be deregulated. A possibly apocryphal story suggests that the airlines’ request was supported by Nevada’s congressional delegation owing to the CAB’s perceived failure to authorize more flights to land in Las Vegas.

Prompted in part by Alfred Kahn’s testimony, Congress passed the Airline Deregulation Act and President Carter signed it into law on October 26, 1978. Because of the stagflation and “malaise” gripping the economy at the time, President Carter justified his action publicly as an initiative that would help fight inflation. That explanation was, of course, nonsensical, but Mr. Carter was trained at the Naval Academy as a “nuculer” (his Georgian pronunciation of “nuclear”) engineer, not as an economist.

It is important to emphasize that the Airline Deregulation Act did not undercut the regulation of aircraft safety by the Federal Aviation Administration (FAA) while deregulating the CAB’s economic controls over airfares and market entry. Safety (measured by the number of airline accidents and passenger injuries and deaths per mile travelled) has been rising secularly for many years so that flying is about the safest travel mode on the planet; it is certainly much less risky to board a plane to Granny’s house for Thanksgiving than to drive there.

At the end of the day, however, October 24th is a date that should be celebrated for relaxing the federal government’s regulatory death grip on the American economy. Few examples of deregulation exist. Another, for which thanks also are owed to President Carter and to Senator Ted Kennedy, is the sun-setting of the Interstate Commerce Commission, established in 1887 to oversee railroad pricing and later given authority to regulate over-the-road motor carriers and interstate pipelines.

Although flying coach nowadays is like riding a Greyhound Bus, airfares are significantly lower, thereby making flying affordable to many more people. One can lament the loss of some of the benefits of regulation, such as meals in coach, attentive cabin attendants, and lots of empty seats, but most people probably prefer lower airfares to the higher ones that regulators previously forced them to pay.

92 Percent of Nurses Are Dissatisfied with Electronic Health Records

nurseAlthough we have discussed their dissatisfaction with electronic health records, hospitals and physicians are not the only victims of the federal government’s $30 billion adventure in underwriting poor IT investments. Nurses are almost uniformly disappointed in EHRs, according to a new survey by Black Book Market Research:

Dissatisfaction with inpatient electronic health record systems among nurses has escalated to an all time high of 92%, according to the Q3 2014 Black Book EHR Loyalty survey results to be published later this month. Disruption in productivity and workflow has also negatively influenced job dissatisfaction according to nurses in 84% of US Hospitals. 85% of nurses state they are struggling with continually flawed EHR systems and 88% blame financial administrators and CIOs for selecting low perfomance systems based on EHR pricing, government incentives and cutting corners at the expense of quality of care.. 84% of nursing administrators in not-for-profit hospitals, and 97% of nursing administrators in for-profit hospitals confirm that the impact on nurses’ workloads including the efficient flow of direct patient care duties were not considered highly enough in their administration’s final EHR selection decision.

Allow me to point out that even nurses working on the front lines of health care, who should be too busy taking care of patients to concern themselves with the goings on of politicians and bureaucrats, are aware that “government incentives” are a major cause of the problems that they face dealing with EHRs every day.

The federal financing of bad investment in EHRs is coming to an end. Soon, hospitals and physicians’ offices will be “ripping and replacing” the EHRs that the government bribed them to implement. As long as the government does not insert itself into the process again, the next generation of EHRs will be implemented based on patients’ needs instead of government’s priorities.

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For the pivotal alternative to Obamacare, please see the Independent Institute’s widely acclaimed book: Priceless: Curing the Healthcare Crisis, by John C. Goodman.


Is Humanitarian Aid Strengthening ISIS?

Protest against the military operation in FallujahRecent reports on U.S. efforts to confront the Islamic State in Syria and Iraq revealed something disturbing. As U.S. forces launch attacks against ISIS, a vast array of U.S. and other western aid has been flowing into the region...and directly to the jihadist fighters.

Reports state that in order for aid to travel through certain areas, groups like the U.S. Agency for International Development (USAID) have paid ISIS leaders (in some cases as much as $10,000) “transportation costs” (i.e., bribes) in order to move their cargo through ISIS-controlled areas. This provides the group a steady source of income, in addition to many supplies. In some cases ISIS insists on distributing the aid, withholding the supplies from civilians and instead using the materials to supplement their efforts.

While this story is timely, it is certainly not the first case of foreign aid gone wrong. In the summer 2009 issue of The Independent Review, Christopher J. Coyne and Matt E. Ryan explore the U.S.’s extensive history of questionable aid decisions in their article, “With Friends Like These, Who Needs Enemies? Aiding the World’s Worst Dictators.” 

In the piece, they explain how the U.S. has provided millions in assistance to the some of the world’s most brutal regimes. Those who have received aid include Cuba’s Fidel Castro, Iran’s Sayyid Ali Khamenei, Libya’s Muammar al-Qaddafi, North Korea’s Kim Jong-il, and Zimbabwe’s Robert Mugabe, among a variety of others.

We can now add ISIS to the list.

When discussing my skepticism of foreign aid, I am frequently confronted with looks of confusion, disapproval, and—dare I say—utter horror? These looks are typically followed by a variety of questions: How can anyone be against sending aid to those desperately in need? Don’t you want to save the people under control of some brutal tyrant? Certainly you can’t suggest we do nothing?! Some aid has to be better than no aid, right? Wouldn’t you have to agree that if one needy person gets the aid we send, then it’s worth it?

In my last post, I pointed out a very important concept in economic analysis, the idea of “means and ends.” If we take our ends, or goals, as given, do the means (proposed solution) solve the problem? In the current conflict, the goal is to destroy ISIS and assist civilians living in the conflict zone.

Undoubtedly, innocent people are being harmed and killed by ISIS. This is absolutely abhorrent. But as the above points out, the aid the U.S. and others are supplying may not in fact be helping to achieve either of the U.S.’s supposed goals. In fact, these efforts are likely making matters worse. Instead of relieving the suffering of the innocent, the massive influx of aid prolongs their plight by propping up the very group that threatens their well-being. The aid intended for civilians may never reach them, but instead provides ISIS with the physical and monetary resources to further sustain their campaign. As Coyne and Ryan pointed out, this is only one of many times this scenario has played out across the globe.

When discussing foreign aid, when confronted with the looks of confusion and disapproval, I come back to the concept of means and ends. I explain that I am skeptical of foreign aid because I care very much about people. Images of starving children, refugees displaced by war, and people living in unsafe environments invoke feelings of discomfort and genuine concern. But I refuse to blindly advocate policies because they make me feel good. I would argue such actions can be downright dangerous.

People often advocate counterproductive policies because they appeal to our sense of morality. We have done something and, therefore, have fulfilled our obligation to our fellow man. To do nothing is simply unfathomable and makes us terrible people. Allow me to argue that, in some cases, doing nothing is better than doing something. If our aim is truly to help those in need, we should first ensure that our efforts are in fact helping or, at the very least, are not making a situation worse. To do otherwise is irresponsible and, I would argue, truly immoral.

(Note: Coyne has written extensively on the topic of humanitarian aid failure. I highly recommend his most recent book, Doing Bad by Doing Good: Why Humanitarian Action Fails. You can also find a link of Coyne discussing his book with the Independent Institute here.)

Obama Appointee Supports Individual Rights

VanitaGuptaI’ve been critical of the Obama administration in the past, so it’s nice to find something positive to say. This article says that President Obama’s new acting head of the Justice Department’s Civil Rights Division, Vanita Gupta, “supports decriminalizing cocaine, heroin, LSD, methamphetamine, ecstasy and all dangerous drugs, including marijuana.” It’s nice to see that someone in government supports individuals’ rights to make their own choices, rather than having the government tell them how they have to live their lives.

My personal view is that it is a bad idea to take any of these drugs, but just because that’s what I think, or that’s what some politicians think, doesn’t mean it should be illegal for you to do things other people think are bad for you. “Freedom” is meaningless if you have the freedom to make only the choices that your government thinks are good choices.

The article says Ms. Gupta has argued that the misnamed war on drugs “is an atrocity and that it must be stopped.” The article goes on to say that she objects to what she perceives as draconian mass incarceration, which has resulted in a bloated prison population, and the war on drugs that she perceives as a failure.

I don’t know anything about Ms. Gupta beyond what is in that article, and the article focuses on her supporting freedom for individuals to make their own choices with regard to drug use, rather than have government dictate those choices for them.

Based on that article, everything I know about her is positive, and I’m happy to see the president appointing people who stand up for individual rights.

The article I linked to came from The Daily Signal, an internet publication of The Heritage Foundation. One would expect the conservative Heritage Foundation to be at odds with the Obama administration on most issues, but I admit that I am disappointed that The Heritage Foundation, which claims on its website to support public policies based on limited government and individual freedom, is taking a stand against individual rights, and in favor of more government oversight and interference in our lives.

People are not free if they are prohibited from making what those in government perceive are bad choices. In this case I am happy to see the Obama administration standing up for individual rights, and disappointed that a prominent conservative organization supports the nanny state.

Australia to Raise $5 Billion by Privatizing Its Biggest Health Insurer

AustraliaHealthCareAustralia’s federal government is aiming to raise almost $5 billion by privatizing the country’s largest health insurer:

Australia hopes to raise up to Aus$5.51 billion (US$4.82 billion) through the sale of the country’s largest health insurer in an initial public offering, Finance Minister Mathias Cormann said Monday.

Cormann said the sale would remove the current conflict where the government is both the regulator of the private health insurance market and owner of the largest market participant. Medibank provides cover to 3.8 million people.

The government has previously said Medibank is one of 34 competing funds in the private health insurance market in Australia and that a scoping study had found no evidence that premiums would rise as a result of the sale. (AFP via Yahoo! News)

Australia has been shrinking the role of government in health care. Although a national single-payer scheme was established in 1975, the federal government re-introduced private choice within a few years. Indeed, Medibank Private is the descendant of the original single-payer plan, Medibank.

Today, almost half of Australians have private health insurance. Largely, this was a result of the federal government partially re-introducing underwriting in the late 1990s so that insurers could charge premiums that were more actuarially accurate to an applicant’s age. Previously, age could not be considered in setting premiums. The reform encouraged people to buy hospital insurance by age 30. Every year of delay results in an increase of 2 percent. So, if one dawdles until age 50, one will pay about 40 percent more. This is far from pure actuarial accuracy, but in a health system run by politicians, it is quite a strong achievement.

Obamacare does the opposite: Discouraging people from signing up because they can enroll every year starting November 15 through February 15 of the next year. So, a healthy young person can risk the consequences of being uninsured for no longer than ten months. This is one reason why healthy young people shun Obamacare coverage.

An article written in 2008 by a former colleague of mine gives American readers more details and context about Australia’s increasing privatization of its health sector.

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For the pivotal alternative to Obamacare, please see the Independent Institute’s widely acclaimed book: Priceless: Curing the Healthcare Crisis, by John C. Goodman.

Is Medicaid-Associated Overuse of Emergency Departments Just a Surge?

Research14092480_S from the UCLA Center for Health Policy Research suggests that rising Medicaid dependency does not result in a secular increase in use of hospitals’ emergency departments. Rather, the jump in ED use is just pent-up demand being satisfied, and drops off. This is the conclusion of a study that examined ED visits by California patients newly enrolled in a government program similar to Medicaid, called the Low Income Health Program (LIHP).

This suggests different consequences to Medicaid expansion than the Oregon Medicaid experiment showed:

Although our results are not directly comparable to those of the Oregon Health Insurance Experiment, they suggest that the higher costs and utilization among newly enrolled Medicaid beneficiaries is a temporary rather than permanent phenomenon. To the extent that California’s experience with the pre-ACA HCCI and LIHP programs is generalizable to other states, policymakers and service providers can expect a reduction in demand for high-cost services after the first year of Medicaid enrollment.

If true, this contradicts the story I’ve been telling, and should make us happy that the new Medicaid dependents will get timely, quality, preventive care that will reduce their need to go to EDs:

“We found that the surge doesn’t last long once people get coverage,” said Nigel Lo, a research analyst at the UCLA Center for Health Policy Research and the study’s lead author. “Our findings suggest that early and significant investments in infrastructure and in improving the process of care delivery can effectively address the pent-up demand for health care services of previously uninsured people. Fears that these new enrollees will overuse health care services are just not true.”

Unfortunately, this conclusion is unconvincing.

In the first three months after enrollment, there were six ED visits for every ten new beneficiaries in the “highest-demand” group. This is the group which was previously uninsured but had not used county indigent services prior to enrolling in the government program. It comprised 37 percent of the newly insured. However, there was no barrier to them using the ED when they had been uninsured: Nine percent of the newly insured had used EDs before getting coverage. (The rest of the newly insured had been on another government program, Health Care Coverage Initiative, which was cancelled.)

What is important to remember about Medicaid and similar programs is that you can sign up when you need care. People with private insurance can sign up only during open-enrolment periods.

Sure, the people who sign up for Medicaid will consume a lot of medical care and then dial it back. But they will also drop out of Medicaid until they need it again. Meanwhile eligible people who become sick will sign up next quarter. It never stops.

And it certainly does not address the problem that Medicaid provides poor access to physicians. If it did, the newly covered would not have had to flood hospitals’ emergency departments.



The Case for Drugstore Clinics

healthcareIn The Atlantic, Richard Gunderman, MD, PhD, has delivered “The Case Against Drugstore Clinics.” It is a weak case. Let’s take his strongest argument first:

A woman with a sore throat went to a retail clinic and received a prescription for antibiotics. After a few days, she hadn’t gotten better, so she went to her family physician. The physician determined that the sore throat was probably due to a viral infection. He also, however, talked to her about her overall health and life. This conversation led to a previously unsuspected diagnosis of clinical depression. The patient is now in treatment and doing much better.

A case like this illuminates three important differences between the retail clinic and the physician’s office. First, the retail clinic prescribed an antibiotic, but in the physician’s judgment the infection was not bacterial. Overusing antibiotics can promote the development of antibiotic-resistant strains of bacteria. Second, the minute clinic focused exclusively on the sore throat. And third, the physician’s more comprehensive evaluation led to a diagnosis with important implications for the patient’s overall, long-term health.

Dr. Gunderman’s implicit assumption is that if the retail clinic were outlawed, the patient would have gone to her doctor first. However, there is a reason she did not go to the doctor first: The doctor’s hours were inconvenient; the patient could not get an appointment; or the physician’s fee was too high for such an apparently simple problem. Without the option of a retail clinic, the patient might not have been treated quickly at all, and when she did finally go to her physician he would not have known that the antibiotic had not worked. Dr. Gunderman implies that overprescribing antibiotics is a problem unique to retail clinics. On the contrary, it is a longstanding practice of U.S. physicians, confirmed by research published just last year.

It gets worse: Dr. Gunderman describes a clear benefit of retail clinics as a drawback:

One is the fact that they tend to siphon away many of the simpler, quick-to-treat conditions from physicians’ offices and hospitals—these common problems help keep costs down and keep hospitals in business. If retail clinics handle a growing percentage of the relatively straightforward cases, doctor’s offices and other facilities that offer more complex care will find their average patient becoming more complex, driving up their costs even further.

It is hard to over emphasize how wrong, wrong, wrong this accusation is. The “too big to fail” nature of general hospitals is one reason why they are so inefficient: They do not specialize. This is a major reason why costs are so opaque in U.S. health care. In a functioning market, no enterprise would try to mix easy and complex cases in order to average down its costs. An operation that specialized in high cost procedures would bring those costs down, rather than disguise them by cross-subsidizing from low-cost procedures. We see increased specialization in the practice of medicine itself. The family physician described above, who diagnosed his patient’s cough and depression, likely referred her to a psychiatrist. If she had a tumor in her brain, he would not have performed surgery. By Dr. Gunderman’s logic, neurosurgeons should spend much of their time in low-cost family practice, in order to “keep costs down” when they do a brain operation every month or two.

Few things would be better for U.S. health care than physicians forming collaborative relationships with retail clinics in their communities, in order to improve continuity of care. However, this relies on identifying and breaking down regulatory barriers, not professional turf protection.