Number of Adults with Consumer-Driven Health Plans Grows to 21 Million

piggy-bankA new survey from the Employee Benefits Retirement Institute (EBRI) reports that 21 million adults have health plans that qualify them to open a Health Savings Account or a Health Reimbursement Arrangement.

We refer to these plans as Consumer-Driven Health Plans (CDHP) because they offer lower premiums in return for higher deductibles than traditional plans. Although the groundwork for these plans was laid as early as 1978, they really took off in 2004, as a result of the 2003 Medicare Modernization Act, which allowed any working American to sign up for such a health plan.

An added benefit is the Health Savings Account (HSA) or Health Reimbursement Arrangement (HRA), which are means whereby the individual can avoid tax on income used to pay medical bills.


The Hayekian Liberty of Ender’s Game


Ender’s Game, the #1 New York Times bestseller, was made into a 2013 film starring Harrison Ford, Hailee Steinfeld, Viola Davis, Abigail Breslin, and Ben Kingsley.

Finally, after much encouragement from my college freshman daughter, I just finished reading Ender’s Game, the best-selling science fiction novel by Orson Scott Card that won the Nebula and Hugo awards when it was published in the mid-1980s. The story follows the cultivation of a 6-year-old, boy-wonder, military tactician, Andrew “Ender” Wiggin, as he is prepared to lead a massive intergalactic war that threatens Earth and the entire human race.

This book should be on the reading list of every free-market economist and libertarian. It’s the only novel I’ve read to date that fuses the fundamental problem of market coordination and the value of dispersed knowledge with the essence of individual liberty (although this is fully revealed only at the end). The main plot and character arc of Ender can be read as an allegory that brings to life the core conflict between markets (and liberty) and central planning, all in the context of interplanetary warfare.

The story is also implicitly critical of the authoritarian world in which Ender lives—strict population control limits families to two children although Ender is a Third because the military authorities considered the genetic makeup of his family “promising”—likely to produce a military commander capable of leading the interplanetary fleet. Religion has also been banned, although Ender’s family doesn’t abandon many of these fundamental beliefs. Ender is raised with a strong allegiance and loyalty to his family as a result.

The story is very humanist. It’s primarily a character-driven story, effectively showing the human toll on Ender and his fellow child soldiers (Suzanne Collins anyone?) during their training for total war. No one will come away from Ender’s Game thinking that the violence total war requires is either compassionate or, for that matter, necessary. Whether it is Just is a bit more controversial, but I won’t spoil too much of the plot and ending in this post.

Rather, it’s the source of Ender’s genius that is so central to the plot and the broader lessons about individualism, liberty, and the value of markets. Ender has a startling degree of empathy. He understands the motivations and psyche of his friends and his enemies. And, as a commander, he allows his officers to lead, take risks, and use their judgement. Even when he is outnumbered, Ender is able to use the creativity of his sub-commanders to gain advantage. In fact, Ender’s insubordination—his willingness to take risks and follow his own path–is an essential part of his development as a commander. This is the entrepreneurialism that forms the heart of much free-market economics, particularly Austrian economics.

In contrast, his enemy, “the buggers,” are directed by a central commander. A Queen Bee, if you will. The enemy’s strategy is centrally coordinated. More uniquely, their entire strategy is based on complete and instantaneous knowledge of the central planners goals, values, and directives. It is a true collective. Even in this ideal setting, the centrally coordinated strategy is less adaptable, less nimble, less robust, and, ultimately, less resilient.

Thus, Card has set up a battle of values and social systems, not just military strategies. Ender instinctively and effectively utilizes the intelligence of all the individuals in his fleet by letting them use their decentralized and fragmented knowledge, expertise, and skills to make critical decisions in the field, including being alert to new opportunities (entrepreneurship) and being accountable for their actions. While Ender still plays the commander, he learns that his effectiveness increases by giving his friends more freedom, not less. Humans survive the war, thus showing the benefits of individual freedom over central planning.

But Ender’s Game is more than an allegory for the economic coordination problem (and calculation debate). It’s also a tale of misunderstanding, insensitivity, and the needless destruction brought about by total war. The military commanders get what they want–the ruthless destruction of an enemy–but the book calls into question in a very fundamental sense what an enemy is. I won’t spoil the ending, but the message is a profound call for the objective value of life and humility in interpreting the intent and actions of others.

Card’s writing style is so crisp, direct, lean that it makes Hemingway seem verbose. While many literary mavens will clamor for more description and rhetorical flare, the benefit is a fast paced novel that ends up focusing more on the psychology and emotional conflicts of the protagonist than the setting and environment. The fast pace and streamlined writing is driven by dialogue and the inner thoughts of Ender, and this probably explains why the book is popular with teens and young adults as well.

But, like most good science fiction, the ideas are what has given Ender’s Game heft and shelf life, and these ideas are fundamentally celebratory of individual liberty, hostile to the violence of warfare, and, even if indirectly, pro free market.

Why Are So Many Economists Confused About Obamacare’s Effects on Jobs?

Casey B. Mulligan’s The Redistributive Recession is one of eight books reviewed in the Fall 2013 issue of The Independent Review.

Casey B. Mulligan’s The Redistributive Recession is one of eight books reviewed in the Fall 2013 issue of The Independent Review.

What’s wrong with the business economists? Have they forgotten everything they learned in Econ 101?

Casey Mulligan explains it for the umpteenth time:

As far as I know, before this month the only place that one could read about the Affordable Care Act’s new employment tax was in this paper by David Gamage, in posts I have written for this blog, in my 2012 book or in a 2013 paper. Even though the consequences of the law have been debated at least as far back as 2009, the law’s advocates have yet to acknowledge the new implicit employment tax, let alone estimate the number of people who will face it.

But in a recent paper, the Congressional Budget Office has joined me in explaining that it’s not just the implicit income tax that will contract the labor market. As the paper puts it, “The loss of subsidies upon returning to a job with health insurance is an implicit tax on working,” adding that the effect of the new tax is “similar to the effect of unemployment benefits” (see Page 120).

Once we consider that the new law has an employer penalty, too, the labor market will be receiving three blows from the new law: the implicit employment tax, the employer penalty and the implicit income tax. Regardless of how few economists acknowledge the new employment tax, it should be no surprise when the labor market cannot grow under such conditions.

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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.

[Cross-posted at Psychology Today and John Goodman’s Health Policy Blog]

Taxpayers Get Forked Again

PerezFrom the “you-can’t-make-this-stuff-up” file, California Assembly Speaker John A. Perez (D-Los Angeles) is sponsoring a bill to create an Office of Farm to Fork.

AB 2413, which was introduced February 21, would create a new office within the California Department of Food and Agriculture to promote “healthy food access,” especially in “underserved” areas, and seek “partnerships” between public health agencies, farmers, schools, nonprofits, and others.

The price tag for this new bureaucracy has not yet been determined, but be assured it will be in the millions to expand government agencies, and subsidize NGOs, farmers, and retailers. Hopefully the legislature will kill this unnecessary bill.

Most frightening, however, is that Perez wants to be California’s next Controller, the state’s chief fiscal watchdog.

When announcing his candidacy for Controller, Perez said:

I will continue to advance smart investment decisions that help businesses, create jobs, and unleash California’s full potential.

If Perez thinks an Office of Farm to Fork is a “smart investment decision” worthy of taxpayer support, you can be certain that as Controller he will mismanage public funds and treat taxpayers with disdain.

False Advertising for Obamacare

9627788_SPresident Obama and Congressional Democrats have a standard talking point when defending Obamacare these days: no longer can insurance companies cancel your insurance after you get sick. They are lucky they are not subject to the same FTC regulations that apply to commercial businesses. This practice has been illegal under federal law since the presidency of Bill Clinton, and it has been illegal in most states long before that.

There is one tweak in the ACA that pertains here. In the past, if an applicant gave false information when applying for insurance, the insurer could later cancel the insurance and refuse to pay medical bills. These are called “rescissions.” How often did this happen? Industry sources report that it happened in about ½ of 1% of all polices. See Austin Frakt’s summary. Under the new law, the misrepresentation has to be “intentional.” “Is this a big deal?” asks Frakt. Probably not.

But here is what is a big deal, even though Austin ignores it: The president is using the problems of a tiny fraction of the population to justify draconian regulation of the health insurance of everyone in America! That’s outrageous. The change in the ACA pertaining to rescissions required a one-line piece of legislation. The bill we are living with is 2,700 pages long.

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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.

[Cross-posted at Psychology Today and John Goodman’s Health Policy Blog]

Medicaid Madness in Maine: Will the Legislature Punish a Consultant for Reporting the Truth?

23972583_SSo far, Maine has resisted the temptation to grab new federal Medicaid dollars dangled by Obamacare. However, due to relentless lobbying by hospitals and other interest groups that profit from taxpayers’ dollars, leaders in the legislature are threatening to interfere with executive authority by introducing a bill to cancel a contract with a consultant who told the truth about the damage Medicaid is doing to Maine’s prosperity.

Expanding MaineCare (as Medicaid is called there) will not only burden state taxpayers; it will also increase inappropriate use of emergency rooms, decrease access to care for Maine’s most vulnerable residents, decrease private coverage, and even increase unemployment.

Today, 61.55 percent of MaineCare is federally funded. For the newly eligible population, the federal government would pay 100 percent of costs through 2016, then drop its contribution to 90 percent.

This offer is understandably tempting. But chasing after federal dollars has always driven states to increase their own spending, not reduce it. This is clearly shown in a thorough analysis of the costs of expanding MaineCare that the state’s Department of Health & Human Services commissioned from the Alexander Group. The Alexander Group is led by Gary Alexander, who succeeded in reducing costs and increasing quality when he reformed Medicaid in Rhode Island.


Leopoldo Lopez: Venezuela’s “Dangerous Man”

liberty_for_latin_america_180x270After several days in hiding, Leopoldo López, one of the leaders of Venezuela’s resistance movement, turned himself in at a massive protest rally and proclaimed: “If my imprisonment serves to wake up will have been worth it.”

The Chavista dictatorship headed by Nicolás Maduro has charged him with acts of violence related to recent protests. Actually, as multiple testimonies and large amounts of graphic evidence demonstrate, the violence has been perpetrated by the paramilitary groups, known as “colectivos”, that the government has armed and eulogized as protectors of the Bolivarian revolution.

These militias are similar to the ones the Cuban government routinely employs against its critics. It shouldn’t come as a surprise. Cuba is closely involved with the Venezuelan regime and has played a key role in the design and operation of the security apparatus. Maduro’s ties to Havana go back to the 1980s, when he was trained at the infamous Escuela Superior del Partido Comunista, also known as “Ñico López.” Defectors from the intelligence services have stated that he has had close connections with Castro’s America Department, charged with spreading the revolution across Latin America.

Why is Leopoldo López so dangerous? For several reasons.


FDA Continues to Impede Medical Device Innovation

19560267_SIn the Wall Street Journal this week, Dr. Scott Gottlieb discussed (gated, by subscription only) a worrying trend in the Food and Drug Administration’s regulation of medical devices. Increasingly, the FDA is demanding that device makers conduct trials of new devices by randomly assigning patients to the new device . . . or to a sham surgery without the new device.

In the example cited by Dr. Gottlieb, patients were assigned to sham surgery instead of to a real surgery that inserted a device that ablates (destroys) small nerves in arteries, a procedure that reduces high blood pressure. At great expense, these patients’ arteries were cut open, poked, and prodded, but no functioning device was inserted. The point was to determine whether the device actually worked or whether a placebo effect caused a positive outcome.

What is especially unfortunate about this development is that the traditional clinical trial of such medical devices is a “non-inferiority study,” a study in which the new device is tested against an already approved device. If the new device is at least as good as the incumbent, it is approved.

It is hard to see how the emerging approach is ethical. Patients who would have received an older, proven device are now increasingly subjected to sham surgeries instead. I have heard anecdotes of surgeons refusing to participate in such procedures.

Patients, payers, and regulators should be thrilled that device makers are content to conduct studies that compare effective devices against each other. In contrast, pharmaceutical companies are very reluctant to conduct trials that compare safe and effective drugs against each other. In the pharmaceutical context, such trials are used not to demonstrate non-inferiority, but to show whether the new drug is superior to the old drug.

In these cases, they are called head-to-head trials, and many self-styled patient advocates have lobbied to demand that drug makers conduct such trials. A few years ago, I wrote an article explaining how head-to-head trials for the purpose of demonstrating superiority are much more expensive and difficult to interpret than placebo trials for drugs. (In the latter, patients in the control group are given a sugar pill.)

How strange then that the FDA seeks to prevent device makers from conducting trials of two competing, effective technologies, in favor of sham surgeries. It appears to be another case of regulatory overreach that puts many patients in harm’s way.

FDA Regulations Kill

11840327_LPaul Howard and Yevgeniy Feyman in Health Affairs:

Meningitis is a terrible disease that can kill its victims in a single day. About 4,100 new cases are diagnosed annually in the U.S., with a mortality rate of more than 10 percent. Even with treatment, survivors are often left with serious side effects that can include brain damage and limb loss...

Swiss drug manufacturer Novartis has developed a vaccine — Bexsero — that specifically targets this strain of meningitis; the drug has already been approved for use by the European Medicines Agency (EMA), the European Union’s equivalent of the Food and Drug Administration (FDA). And within about nine months the FDA allowed Princeton University to offer the vaccine on campus to its students.

But the drug is not available elsewhere in the U.S. And it won’t be until Novartis completes a costly phase III trial. The authors ask:

The natural question to ask is why the FDA shouldn’t just approve a product already approved for the European Union, Canada, and Australia, while monitoring the vaccine (as all vaccines are already monitored — Bexsero is being actively monitored in the E.U.) through postmarket surveillance records? (Indeed, the more than 5,000 patients vaccinated at Princeton are close to the total number of patients tested in the EMA required trials.)

[Cross-posted at Psychology Today and John Goodman’s Health Policy Blog]

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For more on the health hazards of current FDA practices, see For the pivotal alternative to Obamacare, please see the Independent Institute’s widely acclaimed book: Priceless: Curing the Healthcare Crisis, by John C. Goodman.

Health Spending on State and Local Government Workers Has Outpaced Medicaid Spending by 20 Percent

SHCS-NHEA-02_01_28_2014In a previous post I reported that health benefits for government workers cost 40 percent more than benefits for private-sector workers. This extra cost imposes a significant burden on taxpayers. Researchers at the Pew Charitable Trusts have now answered another, related question: How does spending on health benefits for state and local government workers compare with spending on Medicaid?

In a recent report, the researchers conclude that state and local spending on government workers increased by 444 percent in real, inflation-adjusted terms from 1987 through 2012. Spending on Medicaid grew by 375 percent.

That is, spending on government workers increased almost 20 percent more than spending on Medicaid. Free-market reformers continuously promote the idea of getting people off Medicaid, which is a bloated welfare program. However, we should be increasingly concerned with spending on government workers.