PNHP

Tax subsidies for private health insurance benefit the wealthy

Tax subsidies for private health insurance benefit the wealthy

The Robert Wood Johnson Foundation
The Synthesis Project
May 2003
Tax subsidies for private health insurance: who currently benefits and what
are the implications for new policies?

Policy-makers are considering a variety of new tax credit proposals to expand health insurance coverage. Understanding how current tax subsidies work and their role in supporting employer-sponsored insurance (ESI) is important when designing such policies.

Higher-income workers benefit far more from the current ESI tax subsidy than lower-income workers.

First of all, they are in higher tax brackets. A worker in the 28 percent tax bracket saves 28 percent of the premium cost, while a worker in the 15 percent bracket saves only 15 percent.

They also are more likely to have ESI. Almost 90 percent of workers with income three times the poverty level or higher have ESI, compared to less than one-third of workers with income below the poverty level.

In addition, employers of higher income workers pay a larger percentage of the premium on average, translating into a larger tax exemption for those employees.

Finally, higher-income workers tend to have more coverage-multiple policies, richer benefits, and family rather than individual coverage- increasing premiums and the value of the tax exemption.

Lower-income workers benefit only slightly from the income tax exemption and the Medicare payroll tax exemption. They benefit in the short run from the Social Security payroll tax exemption, but it hurts them in the long run by reducing their retirement income.

The overall impact of the upside down subsidy is striking.

Many economists argue that employers pass on the costs of their contributions for health insurance to workers in the form of lower wages. Under that assumption, the tax subsidy is worth one-third of the premium for families with income above $200,000. These families pay only two percent of their income for health coverage.

In contrast, the subsidy is worth about 10 percent of the premium for families with ESI making less than $10,000. These families pay about 40 percent of their income (including what their employers pay in premiums) for health coverage.

http://www.rwjf.org/publications/synthesis/reports_and_briefs/pdf/no3_policyprimer.pdf

Comment: This report demonstrates that current tax policies designed to support our existing system of employer-sponsored insurance result in profound inequities, disproportionately benefiting the wealthy.

Can modifying tax policy alone correct these inequities? Each adjustment can have an impact on employer participation, employee participation, shifting between individual and employer-sponsored coverage, comprehensiveness of benefit packages, variations in the level of public funding, extent of patient cost-sharing, and endless other potential policies. As each adjustment is made to improve equity, the model will move closer to universal, comprehensive coverage with progressive public funding, and elimination of the link to employment.

Try manipulating the single payer model to include private health plans while preserving the same level of equity that a single payer system would provide. Bet you can’t do it. So why do we keep insisting that we begin with private health plans as we reform health care?

Letter to the Editor – Philadelphia Inquirer

h2. Army Had the Answer

The best health-care system we two have ever known belonged to the U.S. Army.

Dependents were covered; equipment was up-to- date; doctors had a decent salary based on their level of training and experience; defensive medicine was unnecessary since there were no malpractice suits.

Paperwork was minimal, sensible and manageable.

We could be honest with our patients, young or old.

We saluted the adminstrators, but medical decisions were made by medical people in consultation with all those concerned.

Within those appropriate military requirements, we felt perfectly free to provide proper care and were respected as professionals. And although there were snafus, most doctors had a more-than-satisfactory experience.

Despite some problems, like waiting lines in clinics, most patients were also satisfied.

Therefore, the solution to the current medical malpractice insurance crisis: universal, single- payer, tax-supported health care under the aegis of Medicare — an idea which many doctors support — along with compensation panels (not lawsuits) for serious mistakes. Private insurance schemes should be abolished while the income of the health-care professional is, after compensating them for their schooling and indebtedness, kept within definite limits.

Robert E. Kay, MD
Philadelphia
robertekaymd@mycidco.com

Lindley M. Winston, MD
Malvern
lindleymw@aol.com

Study Estimates That Coverage of the Uninsured Would Add Up To $69 Billion in Overall Health Care Spending

Contacts:
Rakesh Singh, KFF (202)347-5270
Jon Gardner, Health Affairs (301)656-7401

Article in Health Affairs Indicates That Newly Insured Would Use Additional Care Amounting to a 3-6 Percent Increase in Health Spending

WASHINGTONā€”ā€”If the country provided universal coverage under the current health system, the cost of additional medical care provided to the newly insured would increase health spending’s share of gross domestic product by less than one percentage pointā€”or about 3 to 6 percent of total health care spending, according to a new report prepared for the Kaiser Commission on Medicaid and the Uninsured and published today by Health Affairs.

Urban Institute researchers Jack Hadley and John Holahan conclude that this rangeā€”$34 billion to $69 billion per year, depending on the approach takenā€”would mean the “cost of expanding insurance coverage may be a relatively small or at least a very worthwhile investment when considered against the benefits of improved health, increased longevity, and potentially greater national income.” The researchers estimate the cost of expansion to universal coverage would increase health spending from 14.1 percent to between 14.5 and 14.9 percent of GDP.

“This study shows that the direct cost of providing care to the 41 million uninsured would be less than annual inflation in health spendingā€”8.7 percent in 2001, but still would require a commitment of new resources in a time of fiscal deficits,” said Diane Rowland, executive director of KCMU.

The study measures the direct cost of care if all the uninsured were provided coverage and they increased their use of the health system to the same rate as the insured population. It therefore reveals the potential increase in overall health spending, and not what federal legislation would cost. Federal legislation would likely have additional objectives and could use a variety of approaches. Depending on the legislative approach, the Congressional Budget Office would estimate a governmental cost for a proposal, which would be distinct from the estimate in this study.

“While it won’t be inexpensive to cover the uninsured, this paper shows that a major coverage expansion would only be a small fraction of what the United States already spends on health care,” said John Iglehart, founding editor of Health Affairs.

Starting with the well-documented premise that having health insurance increases health care use, the authors set out to calculate the cost of new care that would be used if the uninsured population had coverage. The goal was to establish benchmarks that could be used to test the efficiency of future proposals for expanding insurance coverage by comparing them to the cost of an “average” private or public insurance plan.

The two alternative approaches assessed by the study:

1) One assumed the newly insuredā€™s spending would be similar to that of either lower- or middle-income people covered by the “average” private insurance policy,

2) The other assumed coverage would resemble people covered by the “average” public insurance policy (predominantly the Medicaid or State Childrenā€™s Health Insurance Program.

The study findings show that spending for new medical care under a public coverage expansion could cost half as much as under a private coverage approach. Expanding coverage to the entire uninsured population would increase spending by $34 billion under the public coverage standard and $69 billion under the private coverage standard. Including the $99 billion in medical care already used by the uninsured, the total cost of expanding to universal coverage would range from $133 billion to $168 billion.

The two approaches were chosen because of their prevalence in the current system and their distinctive features. Private insurance typically includes cost sharing, a range of covered services, and access to a broad set of medical providers with varying payment rates. Public insurance typically includes limited patient cost sharing, a broad range of services, but limits access to a set of medical providers who are willing to accept lower payment rates.

The Health Affairs article is available at http://www.healthaffairs.org/WebExclusives/Hadley_Web_Excl_060403.htm. The research was supported by KCMUā€™s Cost of Not Covering the Uninsured project. The Commission convened an expert advisory group to work on developing new information and analyses on the uninsured problem in America. The project has previously released work reporting on the consequences of being uninsured and the amount the nation already spends on care for the uninsured. Work will continue on the financial burden bourne by the uninsured when seeking care and the implications of insurance expansions to the near-elderly.

A webcast of todayā€™s policy briefing releasing the article in Washington, D.C., and a video interview with the authors of the study can be viewed after 5 p.m. EDT at the following link http://www.kaisernetwork.org/healthcast/kff/04jun03.

Health Affairs, published by Project HOPE, is a bimonthly multidisciplinary journal devoted to publishing the leading edge in health policy thought and research.

The Kaiser Commission on Medicaid and the Uninsured (KCMU) serves as a policy institute and forum for analyzing health care coverage and access for the low-income population and assessing options for reform. The Commission is a major initiative of the Henry J. Kaiser Family Foundation and is based at the Foundationā€™s Washington, DC office. The Henry J. Kaiser Family Foundation is a non-profit, independent national health care philanthropy dedicated to providing information and analysis on health issues to policymakers, the media and the general public. The Foundation is not associated with Kaiser Permanente or Kaiser Industries.

Democrats must offer bolder health plans

By Robert Kuttner, 5/21/2003

”Make no little plans; they have no magic to stir men’s blood.”– Daniel H. Burnham

WITH ONE EXCEPTION, the health plans released by the Democratic presidential contenders are a set of little plans. They leave the current system largely intact and use subsidies and tax credits to reduce the number of uninsured — as if the whole system were not broken. With slight variations, this is the approach chosen by both former Vermont Governor Howard Dean and Massachusetts Senator John Kerry. And North Carolina Senator John Edwards and Connecticut’s Joe Lieberman will likely do the same. Congressman Dick Gephardt, by contrast, had the nerve to throw a long pass. The problem is that he hurled it in the wrong direction. Gephardt began well. He proposed to repeal Bush’s entire 2001 tax cut. He added another bold feature, opening Medicare to people over 55.

But the rest of his plan mainly gives tax breaks to corporations that provide health coverage for their workers. This sounds good, until you remember that most large corporations already provide some kind of health coverage. For them, the money will be mainly windfall. (Kuttner’s Corollary to Burnham’s Law is that if you’re going to make bold plans, they had better be the right plans.)

Any of the Democratic plans are an improvement on what Bush proposes, which is mainly to shift even more risks to individuals. Reportedly, the Republicans will soon press legislation that is the mother of all bad health bills — privatizing Medicare, turning Medicaid into a limited block grant, limiting malpractice suits, and doing a pro-drug-industry version of prescription coverage.

But the Democrats will need to do more than play defense. They need something bolder to get real political traction from health insurance, let alone to solve the problem.

What is the nature of the health care crisis? For starters, coverage is eroding, even for the insured. There’s a squeeze on corporate profits in a climate of rising health costs. So health costs are being shifted from plan to individual, with the result that many people go without needed treatments that the plan won’t cover and that they can’t afford out of pocket.

The number of people without insurance is also increasing. Smaller businesses won’t provide insurance. More people are self-employed. And as bigger businesses increase the employee share costs, many lower-paid workers decline the insurance because they can’t afford it.

Costs keep escalating for three distinct reasons. Science keeps inventing new tests, new treatments, new drugs, all of which add to the overall costs. The population keeps aging. And the system is stunningly inefficient, with its patchwork of fragmentary health plans and its profiteers taking bites out of each medical transaction.

If we leave intact the present system, with its wasteful fragmentation, billing, underwriting, and insurance company profits, there is only one big place to reap savings — by withholding more care as nonessential and by avoiding the sick.

Yes, there are other containable costs, however they are not the main story. The much-touted crisis in malpractice insurance needs fixing, but it is only a small fraction of the cost problem. And we need to reduce escalating drug costs, by shifting to generics wherever possible and preventing the drug companies from continuing to extend the patents of medicines that should be in the public domain. But that, too, is not the main engine of medical inflation.

The real problem is a system where health insurance is optional for employers and run through private insurers. This leads tens of billions to be wastefully spent, on everything from billing, to second-guessing doctors, to shifting costs, to avoiding subscribers likely to get sick.

Other advanced nations face the same march of science and even more difficult demographic realities — their populations are even older on average, thanks to two generations of better health care. But they are better equipped to contain costs and get the most for their health outlays because they have universal health systems. Yes, there are difficult choices, but they are typically made by panels of doctors, citizens, and ethicists, not by private insurance companies.

The best solution here is national health insurance. We already have it for one segment of the population, through Medicare. The program is easy to understand, and even fits on a bumper sticker: ”Medicare for all.”

Face it: Even incremental proposals by Democrats will be attacked as too costly and entailing too much government. They might as well do it right.

Robert Kuttner is co-editor of The American Prospect. His column appears regularly in the Globe.

This story ran on page A23 of the Boston Globe on 5/21/2003.
Ā© Copyright 2003 Globe Newspaper Company.

http://www.boston.com/dailyglobe2/141/oped/Democrats_must_offer_bolder_health_plans+.shtml

Don McCanne Letter to the Editor

(unpublished)
Letters to the Editor
The Washington Post

Re: “Universal Health Care Gets Boost,” May 26

The common perception of the health care reform proposals of the Democratic candidates is that, as stated in the Washington Post (Universal Health Care Gets Boost,” May 26), all proposals are “big and ambitious, and are far costlier than anything that has been proposed since Clinton.” But that’s not quite true. The most ambitious proposal, the single payer proposal of Rep. Dennis Kucinich, would provide comprehensive coverage for everyone without increasing health care costs.

California Health and Human Services Agency supervised a study of nine models of health care reform. An independeant analysis demonstrated that all models that build on our current system of private health plans and public programs actually do increase costs. But the models that replace the existing private plans and public programs with a single public payer were shown to be capable of providing comprehensive benefits for everyone while actually reducing total health care costs, primarily by eliminating the profound administrative waste that characterizes our current fragmented system of funding care.

The findings are not a mere theoretical construct. The current issue of Health Affairs includes a report on the single payer system established in Taiwan in 1995. Their program “brought the health care utilization rates of the 41 percent of Taiwan’s hitherto uninsured population up to a par with those of the previously insured population” without increasing costs nor increasing waiting times for health care services.

Single payer reform is often dismissed as not being “politically feasible.” But that is hardly a reason to not take a closer look at it. A single payer system would benefit everyone by covering all essential medical services. It would benefit health care providers by converting administrative waste into resources to pay for more care. It would benefit businesses by providing proven mechanisms to contain health care costs, which is not possible under our current system. It would benefit taxpayers by providing better mechanisms to contain government health care costs. The only losers would be the private health plans. But why should our national policies be designed to protect and nurture this expensive, superfluous, and egregiously wasteful industry, at the cost of so much suffering and even death of those who are left out of our system?

It’s time to set aside politics and closely examine policies that would accomplish our goals of affordable, comprehensive coverage for everyone. The single payer model of reform is the only model that would ensure affordability of a truly universal and comprehensive program. It certainly should be front and center in all debates on reform.

Don McCanne, MD
President, Physicians for a National Health Program
Chicago, IL
www.pnhp.org

Incremental reforms will not solve the health care crisis

The Journal of the American Board of Family Practice
May-June 2003
Health Policy

Why Incremental Reforms Will Not Solve the Health Care Crisis

By Don McCanne, MD

Incremental models of reform perpetuate our flawed, fragmented system of funding health care. They perpetuate inequities both in the funding of health care and in the allocation of our health care resources. They limit choice of health care providers. None assures continuity of coverage and care. Many incremental proposals barely have an effect on the numbers of uninsured, and none of them ensure truly universal coverage. All incremental approaches substantially increase health care costs, and most current proposals assure neither financial security nor health security.

In contrast, a single payer program would provide affordable, equitable, comprehensive care for everyone.

Whether through tax policy, public programs, regulatory oversight, mandated coverage, or a combination of these and other interventions, the government will be intimately involved in our health care funding. We can no longer afford to dismiss any valid option because it is a government solution, especially in that all proposals are government solutions. We must decide how we can best use our government resources to be sure that we are receiving the greatest value for our health care investment. Limiting our consideration to various incremental solutions closes the door on the health care reform goals of equity, affordability, and efficiency, and it threatens the goals of universality, provider choice, access, and comprehensiveness. When all are readily achievable, why accept less?

For the full article: http://www.jabfp.org/cgi/content/full/16/3/257

A marketplace tool to improve access to care

California Senate Office of Research
May 2003
Growing Gaps in California’s Emergency Room Backup System
Prepared by Peter Hansel

In October 1998, a patient was brought by ambulance to a California hospital emergency room with symptoms of abdominal distress and shortness of breath. The ER physician suspected an abdominal condition requiring surgery. As the patient continued to deteriorate, the physician twice phoned an on-call surgeon asking that he come in immediately to examine the patient. The surgeon repeatedly refused to come in, advising that the patient be admitted for him to see in the morning. As the patient’s blood pressure and pulse rate dropped to life-threatening levels, the ER physician contacted hospital administrators in an apparent effort to compel the surgeon to come in. The patient suffered a cardiac arrhythmia and died despite a resuscitation attempt. The surgeon arrived during the resuscitation attempt.

On a Saturday night in January 2000, a middle-age man came into a California hospital emergency room with an upper gastrointestinal bleed. The ER physician on duty treated the patient, but did not have the expertise to stop the bleeding. A gastroenterologist was asked to come in and perform an emergency endoscopy. Then another, and another, and another, and another. After three hours and six refusals, no GI specialist would come to the ER and the patient was at risk of bleeding to death. Finally, the ER medical director called a GI specialist he personally knew and told him he would pay him $500 in cash if he came in. The specialist accepted, came to the ER, performed the procedure, and stopped the bleeding.

These cases, while isolated, illustrate the growing problems that are occurring with the state’s system of ensuring “on-call” emergency services – backup services provided by specialists to hospital emergency departments.

Problems with access to on-call services are primarily the result of problems with reimbursement of physician specialists who provide on-call services.

http://www.sen.ca.gov/sor/reports/REPORTS_BY_SUBJ/HEALTH/Ab2611.pdf

Comment: With all of the negative news about the deterioration of our health care system, we finally have a report that indicates that health care access improved (in this one instance). And it seems fitting that the policy implication is consistent with other current private solutions to our health care crisis. Without government intervention, emergency services can be obtained through the simple intervention of payment of a bribe. Ah, the magic of the marketplace!

Single payer insurance, anyone?

Americans prefer health coverage to a tax cut; & a ratio that represents more equitable funding

Modern Physician
May 30, 2003
Most Americans would prefer more health coverage to a tax cut, poll shows
By Leigh Page

Almost two-thirds of Americans think the federal government should extend health coverage to the uninsured, while only one-quarter would want the recently passed tax cut, according to a new poll by researchers at Stony Brook University in New York.

Among those who want an extension of coverage, more of them prefer a major effort involving a tax increase to a more moderate effort that would not, says the study, released Tuesday.

Specifically, the study of 810 adults nationwide finds that 36% of all respondents support a tax increase to expand healthcare.

The poll also finds support for an expansion across the political spectrum. It says 72% of Democrats, 65% of independents and 53% of Republicans prefer action on health insurance to a tax cut. And even 27% of Republicans are willing to pay higher taxes for it.

The study also finds that 71% favor government requiring businesses to offer health insurance to all of their employees, a proposal that died in the healthcare debate in the Clinton administration. This “employer mandate” is favored by 69% of Republican, 77% of Democrat and 72% of independent respondents, it says.

http://www.modernphysician.com/news.cms?newsId=866

Comment: It appears that Americans have accepted the rhetoric that we don’t need a “tax cut for the rich” when we have unmet social needs such as inadequate health care coverage. When framed as a “tax increase,” support declines, although it does not vanish.

Rather than discussing the need for tax increases to fund health care, we should be discussing the impact of reform on total health care spending, public and private combined. Converting public and private spending into a ratio would emphasize that we don’t want to know only the public part of health care costs; we want to know the total health care costs and the respective components. Dismissing private spending from the debate while discussing the change in taxes makes no more sense than if we were to dismiss taxes from the debate and discuss exclusively the changes in private spending. If we want to know what health care is going to cost, we need to know both.

This concept has an important application to the finding that there is very strong support for an employer mandate. Even though many proposals include tax policy, the general misperception is that employer-sponsored insurance is funded predominantly by the employer and does not impact taxes. In fact, not only do tax benefits support employer-sponsored plans, but almost all economists agree that employees also fund health coverage through implicit salary concessions. The public needs to understand that they are not avoiding “tax increases” by receiving “free” health care coverage from their employers. Between taxes and salary concessions, they are paying the full tab collectively. Even worse, both the tax benefit and the salary “reductions” of employer-sponsored plans are regressive methods of funding health care. Lower-income individuals pay a disproportionately higher percentage of their income for health care than do higher-income individuals.

But a properly designed tax component (public) would tend to be more equitably funded since it would be progressive, whereas the salary component (private) would remain a regressive method of funding health care. In fact, all private health care spending is regressive since the percentage of income spent has an inverse relationship to total income. Thus a high ratio of public to private health care spending would represent a more equitable method of funding care, whereas a low ratio would represent a less equitable system.

We really do need to convert the debate into terms of total health care costs and a ratio that represents how equitable the funding really is. There will certainly still be some who believe that government and taxes must be minimized at all costs. Since it is now firmly established that the administrative excesses of our current fragmented system of private plans and public programs create more costs than a single payer system would, we can legitimately ask advocates of private funding (low ratio) whether they would prefer to pay less through an equitable system of funding health care, or pay more merely for the dubious benefit of saying that they are paying into a private system, even though to egregiously wasteful private health plan bureaucracies.

Let’s change the focus of the debate from merely concentrating on taxes to a more informative debate that identifies total costs with a ratio that represents how equitable funding would be. That debate would still include tax policy, but it would place it in a more meaningful perspective.

Americans prefer health coverage to a tax cut; & a ratio that represents more equitable funding

Modern Physician
May 30, 2003
Most Americans would prefer more health coverage to a tax cut, poll shows
By Leigh Page

Almost two-thirds of Americans think the federal government should extend health coverage to the uninsured, while only one-quarter would want the recently passed tax cut, according to a new poll by researchers at Stony Brook University in New York.

Among those who want an extension of coverage, more of them prefer a major effort involving a tax increase to a more moderate effort that would not, says the study, released Tuesday.

Specifically, the study of 810 adults nationwide finds that 36% of all respondents support a tax increase to expand healthcare.

The poll also finds support for an expansion across the political spectrum. It says 72% of Democrats, 65% of independents and 53% of Republicans prefer action on health insurance to a tax cut. And even 27% of Republicans are willing to pay higher taxes for it.

The study also finds that 71% favor government requiring businesses to offer health insurance to all of their employees, a proposal that died in the healthcare debate in the Clinton administration. This “employer mandate” is favored by 69% of Republican, 77% of Democrat and 72% of independent respondents, it says.

http://www.modernphysician.com/news.cms?newsId=866

Comment: It appears that Americans have accepted the rhetoric that we don’t need a “tax cut for the rich” when we have unmet social needs such as inadequate health care coverage. When framed as a “tax increase,” support declines, although it does not vanish.

Rather than discussing the need for tax increases to fund health care, we should be discussing the impact of reform on total health care spending, public and private combined. Converting public and private spending into a ratio would emphasize that we don’t want to know only the public part of health care costs; we want to know the total health care costs and the respective components. Dismissing private spending from the debate while discussing the change in taxes makes no more sense than if we were to dismiss taxes from the debate and discuss exclusively the changes in private spending. If we want to know what health care is going to cost, we need to know both.

This concept has an important application to the finding that there is very strong support for an employer mandate. Even though many proposals include tax policy, the general misperception is that employer-sponsored insurance is funded predominantly by the employer and does not impact taxes. In fact, not only do tax benefits support employer-sponsored plans, but almost all economists agree that employees also fund health coverage through implicit salary concessions. The public needs to understand that they are not avoiding “tax increases” by receiving “free” health care coverage from their employers. Between taxes and salary concessions, they are paying the full tab collectively. Even worse, both the tax benefit and the salary “reductions” of employer-sponsored plans are regressive methods of funding health care. Lower-income individuals pay a disproportionately higher percentage of their income for health care than do higher-income individuals.

But a properly designed tax component (public) would tend to be more equitably funded since it would be progressive, whereas the salary component (private) would remain a regressive method of funding health care. In fact, all private health care spending is regressive since the percentage of income spent has an inverse relationship to total income. Thus a high ratio of public to private health care spending would represent a more equitable method of funding care, whereas a low ratio would represent a less equitable system.

We really do need to convert the debate into terms of total health care costs and a ratio that represents how equitable the funding really is. There will certainly still be some who believe that government and taxes must be minimized at all costs. Since it is now firmly established that the administrative excesses of our current fragmented system of private plans and public programs create more costs than a single payer system would, we can legitimately ask advocates of private funding (low ratio) whether they would prefer to pay less through an equitable system of funding health care, or pay more merely for the dubious benefit of saying that they are paying into a private system, even though to egregiously wasteful private health plan bureaucracies.

Let’s change the focus of the debate from merely concentrating on taxes to a more informative debate that identifies total costs with a ratio that represents how equitable funding would be. That debate would still include tax policy, but it would place it in a more meaningful perspective.

Health insuance companies rank near bottom in service

The Harris Poll
May 28, 2003

Supermarkets and packaged food companies top the list of industries which get the best marks for serving their customers.

At the bottom of the list, only 30% think tobacco companies and managed care companies do a good job, and only 40% think health insurance companies do so.

http://www.harrisinteractive.com/harris_poll/printerfriend/index.asp?PID=379

Comment: We are paying an outrageous amount for poor service from the health insurance companies. Why do so many politicians insist that tax policies be expanded to favor this superfluous and wasteful industry?

U.S.: Patent protection is paramount in health

The New York Times
May 28, 2003
WHO Vows to Overhaul Health Regulations
By The Associated Press

Voicing its alarm at the spread of the SARS virus, the World Health Organization vowed to overhaul outdated international health regulations to deal more effectively with epidemics and the threat of bioterrorism.

“The current regulations are obviously insufficient in view of today’s rapid, high-volume migration, emerging infections and the threats of bio-terrorism,” said U.S. delegate David Hohman. But he stressed that the new rules should represent a “careful balance among disease containment efforts, respect for individual liberties, and a nation’s right to engage in international commerce.”

The debate on intellectual property was the most divisive of WHO’s 10-day assembly, which ends Wednesday. It pitted the United States, which insists that patent protection is paramount in encouraging innovation and new drugs, against developing countries led by Brazil, which argued that health should be given priority over trade.

http://www.nytimes.com/aponline/international/AP-UN-Health.html

Comment: Is the quest for mega-wealth the only motivating factor that drives innovation and new drug development? Maybe we should ask the tens of thousands of dedicated employees and grantees of the National Institutes of Health.

It is instructive to see what the mission statement of NIH says about health and about trade:

The NIH mission is to uncover new knowledge that will lead to better health for everyone. NIH works toward that mission by: * conducting research in its own laboratories; * supporting the research of non-Federal scientists in universities, medical schools, hospitals, and research institutions throughout the country and abroad; * helping in the training of research investigators; and * fostering communication of medical information.

http://www.nih.gov/about/NIHoverview.html

Should our national and international health care policies be guided predominantly by intellectual property and trade issues, or by priorities of health? The NIH and the Bush administration seem to have a disconnect on these priorities.

Americans deluded by free-market rhetoric?

The Financial Times
May 24 2003
America takes its dose of socialist healthcare
By Christopher Caldwell

…a bus trip into nearby Canada. The seniors load up on American-made prescription drugs that are, because of price caps, half as expensive north of the border…

Last week, the US Supreme Court delivered a blow on their behalf. The Pharmaceutical Research and Drug Manufacturers of America (PhRMA), an industry lobby, has spent two years trying to block the state from implementing Maine Rx, a new programme that pressures drug companies to sell to the state’s 325,000 uninsured at a cut rate. The court lifted an injunction PhRMA had won, and now the programme will proceed. More than symbolism is at stake. Twenty-eight states filed amicus curiae briefs on Maine’s behalf.

…the market irony that the working poor pay much more for their medications than anybody else. The middle class get private coverage through their jobs; the indigent get public coverage from the state.

A 1990 law says drug companies that sell to Medicaid must give states the same “best price” that would result from market competition between “health maintenance organisations” and other group insurers – a reduction of about 25 per cent. Maine thinks all its citizens should get this discount. So it is demanding “rebates” from the pharmaceutical companies that it will pass on to the uninsured.

Health creates funny economics in the best of circumstances. If the commodity is life, then the demand is infinite and the supply is 1. Unsurprisingly, then, the Bush administration has approached the problem with an ad hoc mix of policies. The Supreme Court case, in fact, could have been avoided had the administration simply declared whether it thought Maine Rx legal. But Bush dawdled, because he was trapped between his free-market base and an electorate that is increasingly interventionist on health questions.

Maine has tried to act like a big HMO, winning bulk-purchase rates for the last corner of American society that lacks them. The plan is very much in the US style of regulatory welfare. Through the tax code and the Federal Register, private interests are given “incentives” or “directives” that amount to offers one cannot refuse. Maine has ascertained that there is spare profit in drug companies that it would rather use for consumer purposes than for product development. So it is essentially shifting private sector money out of research and into welfare. Americans still do not realise that the prescription-drug controversy, like discussions of national health policy everywhere, is at root an argument over terms of rationing. One enthusiast even calls Maine Rx a “no-cost reform”. That’s wrong. It is a hocus-pocus way of levying a tax on business to fund social services – minus the democratic accountability of a welfare programme. The vast sums that are moved this way never get recorded in the budget ledger, permitting Americans to delude themselves that they are less socialist and more “independent” than their European cousins.

http://news.ft.com/servlet/ContentServer?pagename=FT.com/StoryFT/FullStory&c=StoryFT&cid=1051390299862

Comment: This is yet more evidence that the free market in health care simply does not exist. Instead of beginning the reform debate with a discussion of free markets versus the government, we need to discuss the policies that will result in the best health care utilization of our resources. Once those are decided, then we can define the appropriate role of government in ensuring that those policies are carried out.

Actually, this homework has already been done. All studies confirm that a single, universal, publicly administered health insurance program, funded at our current level, would provide comprehensive health care services for everyone. Why do we continue to refuse to embrace this well documented fact?

Is it really better to limit the discussion to “lack of political traction” in our “free market” economy? People are dying while we dwell on this senseless debate.