Sunday, August 26, 2007

Health Care Vouchers: a Market-Based Approach that Would Cost Nothing

How much does the US already spend on health care for the poor? In 2005 wrote:

"The extension of taxpayer-funded Medicaid to the working poor has led to the largest expansion of a government entitlement since the Great Society was launched in the 1960s.

"The soaring costs of Medicaid - which will more than double this year to close to $330 billion since 1999 - is largely due to legislation that extended Medicaid coverage to many Americans who have low-paying jobs."

Medicaid does not include Medicare, health insurance for the elderly, so it understates health cost transfers. According to the Census Bureau, there are 302,648,273 Americans as of this writing, so let us assume 305 million this year. Thus, very conservatively, Americans spend $330,000,000,000/ 305,000,000 = $1,081 per capita on health care for the poor. If we add Medicare, which according to the Heritage Foundation will cost $454 billion in 2008, America now spends more than $784 billion on health care for the poor and elderly, or $2,570 per capita in cost ($784 billion/305 million), compared to Cuba's $250 per capita on health care for everyone.

The Cuban per capita cost for national health insurance amounts to only 10.28% of the per capita cost of current American contributions to the poor and elderly. Yet, the Democrats and Michael Moore argue that we contribute too little money to health care for the poor. Of course, much of US health care costs is due to mismanagement, unnecessary operations regarding prostate cancer, cardiac bypass and heroic end of life treatments. More fundamentally, providers and health care professionals enjoy a combination of artificially induced monopoly through licensure and other entry restrictions coupled with artificially stimulated demand. There is probably ample corruption and abuse arising from the regulated and third-party-financed system.

Four months ago I called the Cigna Insurance Company in New York and learned that Cigna offered New Yorkers individual coverage coverage for $198 per month ($2,376 per year), with family coverage costing roughly twice as much. We are already paying for a version of national health insurance that is mismanaged so that it does not include all Americans, but it costs enough that it ought to. As Phil Orenstein of Democracy Project has blogged, Rudolph Giuliani has proposed tax incentives of $7500 in exemptions to individuals and $15,000 to families to help pay for the costs of private health coverage that they choose themselves. Tax credits could be paid for via the termination of Medicare, Medicaid, government employee plans and through avoidance of double counting via the termination of corporate health insurance deductibility. A tax credit or dollar for dollar tax abatement or voucher would replace Medicare, Medicaid, government employee plans and corporate tax deductions. For individuals who pay less in federal taxes than the voucher amount, a reverse or negative income payment could cover it. This would not cost taxpayers a dime because Medicare, Medicaid, government employee plans and the corporate tax deduction exceed the total cost of a tax credit that would cover everyone. Even if average costs are $7,500 per person, and exceed savings from terminating Medicaid, Medicare, government employee plans and corporate tax deductions, additional savings could accrue by encouraging insurance schemes that limit payments for unnecessary treatments and bureaucracy.

The cost and coverage problems associated with health insurance are primarily managerial. They could be solved through market competition and redistribution of the monies already expended on health care, much of which is wasted and mismanaged. The waste and mismanagement could be reduced because the vouchers could be set at a level for a plan that excludes various kinds of waste, such as unnecessary operations and futile end of life care.


NHS Doctors to be replaced by nurses

Back to the past for childbirth in Britain

The Health Secretary has approved plans to close “vital” hospital services, which will cost lives, an MP has said. A long-running review of NHS services in Greater Manchester and Cheshire ended yesterday with Alan Johnson’s endorsement of an independent panel’s recommendation to close maternity units at Fairfield in Bury, Rochdale Infirmary, Trafford and Salford Hope. Salford will also lose its neonatal intensive-care unit. The Independent Reconfiguration Panel has also backed plans to down-grade Rochdale’s accident and emergency unit and end emergency surgery at Fairfield Hospital. The changes are expected to happen within five years and are likely to mean more home births and deliveries in units staffed by midwives.

Paul Rowen, the Liberal Democrat MP for Rochdale, accused Mr Johnson yesterday of “wielding the axe” in Greater Manchester in a cost-cutting exercise. Tens of thousands of people had signed a petition against the closure of the hospital’s maternity unit, he said. “I am furious that we have been ignored.”

The reconfiguration panel said that local NHS trusts should consider creating stand-alone midwife-led units at Bury, Salford and Trafford. But the Royal College of Midwives said that midwifery staff might not cope with the work demands. Margaret Morris, chairwoman of Salford Royal Hospitals NHS Trust, said that she was bitterly disappointed. “While we have always supported the principle of having fewer, larger maternity units and developing three major neonatal units, we believed that Greater Manchester would benefit more by retaining and developing services at Salford Royal,” she said.

Ministers defended the changes. Hazel Blears, the Communities Secretary and MP for Salford, said that she was “very pleased” that her constituency was in line to have a stand-alone midwife-led unit. In December Ms Blears joined picket lines to protest over proposals to close the maternity unit at Hope Hospital, despite supporting the national policy on maternity changes. She said yesterday: “As a local MP I have made representations at every stage to ensure that babies can still be born in Salford, and this is still the case.”

The Department of Health said that the changes to the region’s emergency services would be supported by investment of 38 million. An additional 60 million will be invested in maternity, the department added.

Andrew Lansley, the Conservative Shadow Health Secretary, called on the Government to put the hospital cuts on hold until it could “produce the evidence to justify them”. He said: “These cuts have been justified on the basis of what are safe staffing levels, but in other areas similar-sized units are allegedly under no threat. Doctors said yesterday that the changes could save up to 30 babies a year, while NHS managers denied cost-cutting, saying that new services would require more investment, not less.


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