Michael F. Cannon, Author at ��ϳԹ�� News

A Medicare Reform Model Everyone Can Love (Guest Opinion)

Michael F. Cannon — Mon, 11 Jul 2011 18:00:20 +0000

Democrats and Republicans may not be able to agree on whether to increase taxes as part of a deal to raise the federal debt ceiling. But they can at least agree on this much: Congress must restrain Medicare spending. The trick is how to do it without sacrificing access to necessary care?

As luck would have it, we have a home-grown model for Medicare reform that would contain spending and improve the quality of care. This model appeals to both Republican and Democratic ideals: it satisfies the Republican desire for individual ownership and control, but emulates a social insurance program revered by Democrats. The key to improving health care for seniors is to make Medicare look more like Social Security.

Consider: Medicare subsidizes the elderly and disabled by giving them a health plan designed and typically administered by government. Social Security does a better job of meeting seniors’ individual preferences because it gives them cash and lets them decide how to spend it. They can spend more on housing and less on food, or vice versa.

Medicare enrollees have little incentive to avoid wasteful spending, because the savings revert to the government. Seniors spend their Social Security subsidy more carefully, because they themselves keep the savings.

Medicare issues endless regulations that dictate prices and other terms for 1.2 billion health care transactions each year. It’s tempting to think this micromanagement is necessary because health care is special. Yet a steady stream of research shows this command-and-control approach leads to , rampant , , and . It also blocks innovations, such as accountable care organizations, that would solve these problems.

If Social Security subsidized food the way Medicare subsidizes health care, seniors would dine out every night; they would go to a separate restaurant for each course; portions and waistlines would be enormous; everything would be overcooked; the bills would make your jaw drop; and tipping more than would be illegal.

“Medicare gives very good health care very inefficiently,” Sen. Chuck Schumer, D-NY. At least he’s half right.

Suppose that rather than send to providers and insurers, Congress divvied it among Medicare’s and send each of them a check. The average enrollee would get $11,700 — more if they’re sick, poor or disabled. Call it a “bundled payment to enrollees.”

Enrollees could use that cash to purchase medical care or any health insurance plan licensed by any state. Whatever they saved by being prudent shoppers, they could keep and pass to their kids and grandkids.

If 50 million high-end health care consumers suddenly started caring about every dime they spent, they would wring unnecessary services and administrative costs out of the health care sector.

One concern would be that these Social Security-like subsidies would not be large enough for enrollees to purchase decent coverage. The evidence shows they would.

First, they would come with a built-in margin of safety. The Dartmouth Atlas of Health Care estimates that or more of Medicare spending is pure waste, meaning that enrollees Medicare checks would include what Medicare currently spends on worthwhile medical care, plus an additional 40-50 percent. That cushion would also protect against inadequate risk- and income-adjustments.

Second, of enrollees have Medicare supplemental coverage that they purchase directly or through an employer. That often amounts to thousands of dollars that they could use to supplement their Medicare check.

Third, these 50 million Medicare enrollees would demand cost-saving innovations — in the immortal words of

Costanza

– “like an old man trying to send back soup at a deli.”

There’s a lot more to be said about why Congress should reform Medicare in the image of Social Security. But the most important reason may be that it is the only way to restrain Medicare spending while meeting the Democratic goal of preserving Medicare benefits. Again, : “there are savings to be wrought out of Medicare [but] actual cuts in the benefits, are not something we would want to entertain.”

Cutting Medicare spending through a command-and-control approach, such as by reducing provider payments, may inadvertently eliminate access to services that enrollees really want.

If Congress wants to preserve what matters most to Medicare enrollees — you know, the people the program is supposed to serve — then there’s no better way than to give them the money and let them decide which benefits are most important. Who better to judge what benefits seniors than seniors themselves?

That’s how FDR subsidized them, anyway.

Michael F. Cannon ( ) is director of health policy studies at the Cato Institute and coauthor of .

��ϳԹ�� News is a national newsroom that produces in-depth journalism about health issues and is one of the core operating programs at KFF—an independent source of health policy research, polling, and journalism. Learn more about .

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A(nother) Bad Month For Obamacare (Guest Opinion)

Michael F. Cannon — Mon, 27 Jun 2011 09:16:01 +0000

passes two milestones this month. It has been exactly two years since the first version of the legislation appeared in Congress. And it has now enjoyed exactly two years of . Yet this month has been harsher than most.

Supporters of the law went apoplectic, for instance, when a by McKinsey & Co. found that up to 30 percent of firms may respond to Obamacare’s incentives to drop health benefits by — get this — dropping health benefits. McKinsey by its survey.

In addition, the Centers for Medicare and Medicaid Services’ non-partisan chief actuary last week that the law opens Medicaid to 5 million middle-class retirees, a change that “just makes no sense.”

But even as these revelations emerged, a cascade of stories showed Obamacare’s approach to cost control — letting government planners manipulate prices and dictate other terms of health care transactions — doesn’t work.

A federally chartered found that Medicare’s price controls are based on “inaccurate, unreliable data,” resulting in “deeply flawed” price levels, according to .��

A in the New England Journal of Medicine revealed that children on Medicaid were refused appointments by 66 percent of specialists and had to wait 22 days longer for an appointment than kids with private insurance. The main culprit is Medicaid’s price controls, which one reports 24 states plan to ratchet down even further.

Obamacare expands coverage mostly by cramming another 25 million Americans into that program.

President Obama says that his new Independent Payment Advisory Board, whose “recommendations” on Medicare’s price controls will already have the force of law, would contain federal spending. But this month saw Democratic members of Congress and the National Committee to Preserve Social Security and Medicare, typically allies of the president, with Republicans to repeal IPAB.

Former House Majority Leader Dick Gephardt, D-Mo., IPAB as “an unelected and unaccountable group [that] will be able to set payment rates for some treatments so low that no doctor or hospital or other healthcare professional would provide them.”

Government planners are no more competent when dictating other terms of health care transactions, like whether providers receive a payment for each individual service or for bundles of services, than they are when setting prices.��

For instance, experts Medicare’s fee-for-service “payment system” (I prefer “exchange controls”) for encouraging wasteful spending. This month, a federal study found over-use of dangerous among Medicare enrollees.��

Massachusetts’ attorney general reported that state’s “global payment” system, which dictates that providers receive a fixed fee per patient, . In some cases, global payments ended up costing more than fee-for-service.

Senior health economist Alain Enthoven on one Obamacare program that tinkers with how Medicare pays providers in the hope of creating “accountable care organizations” — and that saw its own spate of bad news and last.��“A better way to encourage accountable care,” Enthoven wrote, “is the ‘premium-support’ model proposed by House Budget Committee Chairman Paul Ryan, R-Wis., among others.”

Translation: let market forces set prices and other terms of exchange.

Obamacare saw rough sailing in the courts, too.��Acting Solicitor General Neal Katyal literally an appeals court on the idea that the individual mandate isn’t all that oppressive because Americans can choose poverty as an alternative to complying.��

Before another appeals court, Katyal implicitly that, if the mandate were deemed constitutional, Congress could force Americans to buy non-health care products too, like long-term care insurance.

Various other reports and studies this month highlighted the costs of Obamacare. The Government Accountability Office that the administration denied waivers to firms whose premiums would rise by as much as 9 percent due to just one (!) of the law’s coverage mandates.��

In related news, the administration it would stop accepting waiver applications September 22. Forcing workers to pay higher premiums is, evidently, more palatable than the embarrassment the waivers generated.

Medicare’s chief actuary announced that under reasonable assumptions — as opposed to those contained in Obamacare — the law increases Medicare’s unfunded liabilities by .��

Obamacare’s $1 trillion of new entitlement spending also became harder to defend when the Congressional Budget Office the national debt could exceed the size of the U.S. economy within a decade. Ditto when Moody’s Investors Service to downgrade the U.S. debt rating unless Congress made serious progress toward deficit reduction.

How many months like this can a law endure before it becomes a former law?

Michael F. Cannon (

) is director of health policy studies at the Cato Institute and coauthor of

.

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ACO Debacle Exposes Obamacare’s Fatal Conceit (Guest Opinion)

Michael F. Cannon — Fri, 03 Jun 2011 10:15:00 +0000

Obamacare’s number-one idea for improving health care quality and reducing costs is to promote something called “accountable care organizations” in Medicare. That effort is sinking like a stone, because it like the rest of this sweeping law is premised on the that government experts can direct the market better than millions of consumers making their own decisions.

“Accountable care organizations” is jargon for the radical concept that when doctors and nurses actually talk to each other about shared patients, there will be fewer mix-ups, less duplication and patients will receive better, more convenient care at a lower cost. Markets created the first ACOs, including Kaiser Permanente, more than six decades ago.

The federal government, in contrast, has long tried to ensure that nothing so sensible ever happens. For nearly five decades, Medicare regulations have financially penalized doctors who coordinate care. The Medicare Payment Advisory Commission that Medicare regulations are “largely neutral or negative towards quality” and sometimes pay providers “even more when quality is worse,” like when poor coordination injures Medicare patients.

Obamacare supporters say the solution to this failure of centralized economic planning is more centralized economic planning. The law therefore authorizes Medicare to encourage care-coordinating ACOs.��

Medicare’s idea of encouragement is : If doctors and hospitals invest substantial resources to form an ACO, and better care coordination reduces the amount they bill Medicare, then the ACO will get to keep part of the savings.

“Here’s a flash for the policy wonks pushing ACOs,” industry expert Robert Laszewski. “They only work if the provider gets paid less for the same patient population. Why would they be dumb enough to voluntarily accept that outcome?”

The Mayo Clinic, the Cleveland Clinic and of multi-specialty physician groups are not that dumb.�� In what the Associated Press an “unusual rebuke,” they and other providers that President Obama has as models for his ACO program have refused to participate in it.

Many of the recalcitrant providers gladly participated in a similar program launched by the Bush administration, and this week we learned why: that program to produce any significant savings for taxpayers.��They now want Obama’s ACO program to cough up more money before they will participate.

How much more? A of Swiss doctors is not encouraging.��It found “general practitioners will require a pay increase of up to 40 percent before they are willing to accept coordinated care.” Hospitals claim their start-up costs would be than Medicare bureaucrats estimate.��

A frantic Obama administration took less than a week to capitulate. It told providers like the Mayo Clinic, in effect, “.” It is also “” whether other ACOs “could receive an advance on the shared savings they are expected to earn.” The administration promises to recoup those up-front subsidies, you know, later.

When purchasing health care, the government should do what it can to improve quality while reducing costs. But this latest debacle once again demonstrates that for all its immense purchasing power, Medicare is paradoxically powerless to do so. Why? Because greater efficiency necessarily means that low-quality/high-cost providers will get less money, and those providers all hire lobbyists to protect their Medicare subsidies.

Inefficient providers have effectively killed nearly every pilot program that previous administrations promised would make Medicare more efficient. Suppliers of wheelchairs and other have blocked efforts to reduce the Medicare pays them. The industry has killed or sabotaged dedicated to researching which medical treatments don’t work.

Obamacare’s new , countless pilot programs and even its “Independent Payment Advisory Board” a supposedly insulated from the influence of industry lobbyists will suffer the same fate.

The only way to improve quality while reducing costs is to give patients the incentive and the power to say “no” to inefficient providers.��The that passed the House don’t , but they are a good start.��

For one thing, they would do a better job of promoting ACOs. The House reforms build on Medicare Advantage, which already gives one fifth of Medicare enrollees the freedom to choose their own health plan.�� Kaiser Permanente CEO George Halvorson the new law’s ACO program “is not as good as” Medicare Advantage when it comes to promoting accountable care.

And he should know something about that.

Michael F. Cannon is director of health policy studies at the Cato Institute and coauthor of

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Sit Down, Mitt, You’re Not Helping (Guest Opinion)

Michael F. Cannon — Mon, 16 May 2011 14:01:00 +0000

Mitt Romney’s reversals on , , , and leave one with the impression that when Mitt Romney is with you, he’s with you.��At least until he leaves the room.

Romney’s latest trick is to make his stunning reversal on government-run health care look like a non-reversal. It’s not working.

Republican primary voters abhor President Barack Obama’s new health care law, as do , largely because it includes an “individual mandate” requiring nearly all Americans to purchase health insurance. Romney calls Obamacare an “economic nightmare” that he would repeal as president.

Yet as governor of Massachusetts, Romney in 2006 signed a health care law that included the nation’s first individual mandate, plus a raft of new government spending and regulations. To say it served as a blueprint for Obamacare would be an understatement. NPR that Obamacare “was based, almost line for line, on the Massachusetts model.”

Romney tried once again last week to explain why Obamacare is bad but Romneycare is good. He failed again, this time spectacularly. Conservative columnist Jonah Goldberg the a “political disaster.”

Romney’s first attempt to distinguish between the two laws went like this. He admitted to some similarities, but said that in our federalist system states can do things that the national government cannot. True enough. But is Romney really telling people who care about freedom that the federal government should not take away their liberties, but it’s okay when state governments do it?

Next, Romney claimed, “Our plan was a state solution to a state problem.” In fact, it was neither.

The problem of uninsured people showing up in emergency rooms unable to pay occurs in every state. By Romney’s logic, shouldn’t they all enact an individual mandate? (In the past, Romney said .) And since it’s a federal law that requires emergency rooms to care for those free-riders, doesn’t that suggest the need for a national solution?

If anything, Romneycare may be making the free-rider problem worse. The Wall Street Journal that uncompensated care and misuse of emergency rooms are on the rise in Massachusetts. The number of people who wait until they are sick to buy health insurance then stop paying the premiums once they get treated, the Boston Globe reports, has under Romneycare.

Nor is Romneycare a one-state experiment. The federal government is covering half the cost of the law’s Medicaid expansion and letting Massachusetts keep billions of Medicaid dollars that Washington should have revoked. We are all paying for Romneycare.

Romney’s next ploy was to claim that unlike Obamacare, his plan “didn’t raise taxes.” Really?

If employers don’t provide health benefits, Romneycare fines them $295 per employee. That’s a tax. The federal government’s contribution to the state effort is adding to the national debt. That’s a tax on future generations. Most important, under Romney’s individual mandate, health insurance premiums are the functional equivalent of a tax: people who fail to make the mandatory premium payments face fines and imprisonment.

Finally, Romney that unlike Obamacare, “There’s no government insurance here.” Yet both laws dramatically expand Medicaid, a government-run health insurance program.

Moreover, both make private health insurance compulsory, dictate its content and price, and heavily subsidize it. As columnist Michael Kinsley , “If the government requires insurers to accept all customers and charge all the same price, regulates all aspects of their marketing to make sure they aren’t discriminating, and then redistributes the profits to make sure that no company gets penalized unfairly, in what sense is the industry still ‘private’?”

Romney once , “I would be happy to take credit” for Obamacare. As he should: Romney bears as much responsibility for Obamacare as any Democrat. Now he wants to repeal it. This absurd attempt to have it both ways is turning Romney into a . The longer he drags it out, the more oxygen he will suck out of the effort to repeal Obamacare.

If Mitt sincerely wants to rid the nation of Obamacare, there are things a man in his compromised position can do.

First, while raising money for state-level candidates, he can encourage states not to create any type of health insurance exchange — neither the Massachusetts nor the Utah variety — lest those new government bureaucracies entrench Obamacare.

Second, he can run for governor of Massachusetts again on a pledge to repeal Romneycare.��That might prove his sincerity. And he’s just the man to do it.

Michael F. Cannon is director of health policy studies at the Cato Institute and coauthor of
.

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Yes, Cut Medicaid

Michael F. Cannon — Thu, 05 May 2011 15:07:42 +0000

The passed last month by House Republicans would replace Washington’s current Medicaid-funding system –which encourages waste, fraud and abuse — with a block-grant system that encourages states to combat those problems.�� Incredibly, President Barack Obama that under that vision, “up to 50 million Americans have to lose their health insurance” — as if Republicans had proposed eliminating Medicaid entirely.

The reality is that states could maintain or even expand their Medicaid programs under the GOP proposal because — some critics seem to have forgotten this — states do have the power to raise taxes.

Nevertheless, the GOP budget would encourage states to cut their Medicaid rolls. As it should: the evidence shows there are millions of people enrolling in Medicaid who don’t need taxpayer subsidies to obtain coverage, and experience shows that Medicaid cuts will not be as painful as you might think.

Economists of all political stripes that Medicaid crowds out private health insurance, which provides better access to medical care. Jonathan Gruber, a Massachusetts Institute of Technology health economist and sometime consultant to the Obama administration, has that, in effect, as many as six out of every ten enrollees added to Medicaid and similar programs would otherwise have had private coverage. Put differently, these programs cover four uninsured Americans for the price of ten — a lousy deal even by government standards.

Gruber’s MIT colleague Amy Finkelstein that Medicaid also crowds out private long-term care insurance. For those who qualify, the value of Medicaid’s nursing-home and related benefits is two-thirds that of a typical private long-term care policy.�� Medicaid thereby reduces the marginal benefit of private insurance to just one third of the marginal cost. Consumers therefore choose, quite rationally, not to purchase private coverage.

President Obama elides the existence of crowd-out when he implies that every single senior receiving Medicaid’s nursing-home benefits “wouldn’t be able to afford nursing home care without Medicaid.” That’s simply not true. An entire of elder-law attorneys has emerged to help seniors qualify for Medicaid without spending down their wealth.

All of which means that if states reduce eligibility for their highest-means enrollees, many will obtain private coverage themselves. These include the patients of a Louisiana ob-gyn who, The New York Times , have private coverage through an employer but enroll in Medicaid when pregnant to avoid the co-pays.

How many former Medicaid enrollees would obtain private coverage if states reduced their rolls? It depends. But consider two examples.

In 1996, Congress eliminated Medicaid eligibility for many non-citizen immigrants.��Coverage among non-citizen immigrants actually — the opposite of what one might expect — because non-citizen immigrants responded to the cuts by obtaining jobs with health benefits.

In 2005, Missouri cut 100,000 people from its Medicaid rolls. The number of adults with health insurance fell, but by a smaller amount than the number cut from the Medicaid rolls, because . With children, the news was even better. Missouri cut loose one fifth of all low-income children enrolled in Medicaid, yet the coverage rate among low-income children did not change. Private insurance filled the entire gap.

Private insurance may not fill as much of the gap today as it did when there were more jobs available. One step that could help spur job creation would be to repeal President Obama’s health care law, which includes individual and employer mandates that are increasing the cost of private insurance at the same time they are reducing job opportunities for low-skilled workers. Repeal would also eliminate the government price controls that have the market for child-only health insurance in some 20 states; restoring those markets would fill even more of the gap.

Crucially, Medicaid block grants would also give states the flexibility to target their programs at the truly needy who can’t obtain coverage on their own.

The president and the Republicans agree that balancing the federal budget is impossible without restraining Medicaid spending. That will be much easier, Mr. President, if we could stop pretending that every single Medicaid enrollee needs to be there.��

Michael F. Cannon (@mfcannon) is director of health policy studies at the Cato Institute and coauthor of

.

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Governors’ Letter Shows Why Medicaid Block Grants Are Necessary — Guest Opinon

Michael F. Cannon — Mon, 18 Apr 2011 00:30:00 +0000

Shortly after House Budget Committee Chairman Paul Ryan, R-Wis., unveiled his to convert federal Medicaid funding to a block grant, 17 governors issued a to congressional leaders to say they “strongly oppose” it.

Ryan, like most of his Republican comrades, hasn’t always been on the side of fiscal responsibility.��He voted for , and that unfunded Republican entitlement program, .��On Medicaid reform, however, Ryan has the better side of the argument.

The governors write that block grants “would shift costs and risk to states.” In reality, the matching-grant system these governors seek to preserve is a massive cost-shifting scheme.��Block grants would reduce this phenomenon.

For every additional dollar a high-income state spends on its Medicaid program, the federal government sends the state one matching dollar. Low-income states get as much as $4 from Washington for each additional dollar they spend.

Therefore, every time a governor expands his or her state’s Medicaid program, the federal government’s system of matching grants effectively shifts 50 to 80 percent of the expansion’s price tag to taxpayers in other states.

The same is true in reverse. If governors tolerate waste, fraud and abuse, the matching-grant system shifts 50 to 80 percent of the cost to taxpayers in other states.

Today’s system even shifts costs across generations. Matching grants are such a cash cow that states hatch all manner of schemes to “pull down” as much federal money as possible.��(One common practice is for states to secure federal dollars by pretending increase their Medicaid outlays, but then recapturing those outlays by taxing providers.) But each time they do so, states add to the federal deficit, which shifts the cost of current consumption to future taxpayers.

What’s really upsetting these governors is that block grants would reduce their ability to shift the cost of their Medicaid programs to other states.

Under a block-grant system, Washington would give each state a fixed amount of money that would neither rise nor fall with the amount the state spends. Governors would be free to expand their programs, but they would have to come up with 100 percent of cost of those expansions.

These governors warn that having to choose “between increasing taxes, cutting other state programs, or cutting eligibility, benefits, or provider payments” would put them in an “untenable” position.��What they mean is that they want to preserve the open-ended, perennial bailout that Medicaid has always offered.

But since there is no more money in Washington for bailouts or anything else, perhaps a second-best option would be to ask the nation’s governors to start taking responsibility for their Medicaid policy choices.

Finally, the governors call for “federal policy that creates cost savings, not cost shifting.” As luck would have it, block grants would do just that, by encouraging states to reduce Medicaid fraud and abuse.

Various experts estimate that fraudulent and other improper payments account for an 10 to 40 percent of this program.

Economists estimate that Medicaid and similar programs private coverage at rates as high as .��That suggests there are millions of people on the Medicaid rolls who could obtain coverage on their own, and that states could reduce the cost of the program by targeting subsidies to the truly needy.

Fraud and abuse have become so prevalent in Medicaid largely due to the perverse incentives created by the matching-grant system.

Combating Medicaid fraud and abuse is currently a low-return proposition for state officials.��Providers inevitably chafe under the additional paperwork and investigations necessary to police fraud.��Currently, if a state inflicts enough of this political pain to eliminate $1 of fraud, it only keeps 20 to 50 cents; the rest goes back to Washington.��As a result, governors quite rationally make policing fraud and abuse too low a priority.

Under block grants, states would keep 100 percent of the savings from rooting out fraud and abuse, which would encourage states to spend their Medicaid dollars wisely, reduce the cost of the program, and enable states to do more with fewer resources.�� The governors’ position is looking more tenable already.

It wasn’t their intention, but those 17 governors inadvertently demonstrated why block grants are necessary.

Michael F. Cannon is director of health policy studies at the Cato Institute and coauthor of Healthy Competition: What’s Holding Back Health Care and How to Free It.��

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Ryan Budget: A Huge Opportunity To Improve Health Care

Michael F. Cannon — Mon, 04 Apr 2011 00:30:17 +0000

The federal budget is set to produce at least another of red ink over the next 10 years.��President Barack Obama has abdicated leadership on the budget. First he signed a health care law that ostensibly reduces the deficit, but will actually increase it by once you strip away the budget gimmicks. Then he proposed a budget that would federal deficits by $2.7 trillion and double the national debt.

Obama’s budget strategy appears to be, as one Democratic wonk put it, “.” It appears Republicans will do the right thing anyway.

On Tuesday, House Budget Committee Chairman Paul Ryan, R-Wis., will release a budget blueprint that tackles the three big health care challenges facing the federal budget — , and with a strategy of , and . Done properly, those steps would simultaneously improve health care and help balance the budget within a decade.

As it should, Ryan’s budget would repeal ObamaCare. With a national debt roughly the size of the entire economy, we simply cannot afford that law’s two new entitlement programs or its trillion-dollar price tag.

Repeal would also relieve states of the law’s staggering burdens. My colleague Jagadeesh Gokhale ObamaCare’s Medicaid expansion will cost New York $53 billion in its first 10 years. It will cost Florida, Illinois and Texas around $20 billion each.

Even former Sen. Evan Bayh, D-Ind., has ObamaCare’s supposed spending restraints were never a plausible strategy for containing Medicare spending. Even if they were, ObamaCare just spends the presumed savings elsewhere. Scrapping the law will enable Congress to replace those phony measures with .

Second, the budget should restrain Medicare spending by giving enrollees fixed vouchers they can use to purchase any private health plan of their choice. Poor and sick enrollees should get larger vouchers, but the average voucher amount should grow only at the overall rate of inflation.

Because vouchers enable seniors to keep the savings, they will do what ObamaCare won’t: reduce the wasteful spending that permeates Medicare. Seniors will choose more economical health plans and put downward pressure on prices across the board. Indeed, vouchers are the only way to contain Medicare spending while protecting seniors from government rationing.

Skeptics worry that seniors will make bad decisions with their vouchers. They should keep in mind that, according to Obama’s , “ of Medicare’s costs could be saved without adverse health consequences.” In other words, vouchers come with a huge built-in margin of safety: seniors could consume one-third less care without harming their health.

What’s more, a voucher system would improve the quality of care for seniors. To pick a timely example, such a system would level the playing field for “” such as Group Health Cooperative and Kaiser Permanente. These health systems already deliver the quality innovations that reformers crave: , electronic medical records and .

Vouchers will deliver cost-savings and ACOs. ObamaCare won’t.

That’s why Ryan shouldn’t delay a voucher system, as he has doing in the past. Leaving today’s seniors behind would be doubly cruel, over-taxing workers while denying high-quality health care to current enrollees.

Third, the budget should complete the successful 1996 welfare reforms by eliminating the entitlement to Medicaid benefits, converting federal Medicaid and Children’s Health Insurance Program funding into fixed block grants, and freeing states to find innovative ways to provide care to the truly needy. Repealing ObamaCare’s Medicaid expansion and capping federal Medicaid and CHIP outlays at nominal 2012 levels would together federal deficits by $1.6 trillion over 10 years.

Block grants need not remove a single patient from the Medicaid or CHIP rolls. States could even expand enrollment. But block grants would require states to pay the full marginal cost of their programs today, rather than have Congress finance most of it through deficit spending.��As in 1996, skeptics will predict horrific consequences. But they were wrong then — poverty fell dramatically after welfare reform — and they are wrong now.

If Republicans aim to capture this unique and crucial opportunity, they need to convey that a smaller government isn’t just compatible with better health care. It’s a prerequisite.

Michael F. Cannon is director of health policy studies at the Cato Institute and coauthor of

.

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What A Difference A Year Makes

Michael F. Cannon — Mon, 21 Mar 2011 06:09:00 +0000

One year ago today, the House of Representatives approved the Patient Protection and Affordable Care Act, which had passed the Senate the previous Christmas Eve — at four in the morning, . Two days later, President Barack Obama signed the measure. Those three steps are usually enough to transform a bill into a permanent fixture of U.S. law. But this was no ordinary bill.

Before ObamaCare cleared Congress, voters in Massachusetts took the distasteful step of electing a Republican to the U.S. Senate in the hope of stopping it. had introduced, and two states had enacted, legislation to block it. In the year since, three additional states have enacted laws and two states have amended their constitutions to block it.

Twenty-eight states have filed suit in federal court alleging the law violates the Constitution, half of them within hours of the signing ceremony. Individual citizens have filed another two-dozen challenges. Many of these lawsuits are , but not all are: two federal courts have struck down all or part of the law as unconstitutional.

Opposition to the law contributed to sweeping Republican gains in the 2010 elections. The House quickly voted to repeal it. Twenty-one governors have threatened not to implement it. At least four states have , returned or refused the federal funds it offers. have flatly refused to implement it.

Despite assurances that Americans would like the law once they

out what is in it

, familiarity has bred contempt. Public opinion the law the moment the first draft appeared in Congress in June 2009, and a majority or plurality of the public has consistently opposed it ever since. Among likely voters, opposition leads support by . The law’s supposed beneficiaries are among the most hostile groups. A recent found seniors oppose the law by 12 points. Small businesses are among those suing (so far successfully) to overturn it.

This isn’t how it was supposed to happen. never provoked such a backlash in other countries, nor did Social Security, Medicare or Medicaid. What’s going on?

It’s not just partisanship. For one thing, 34 House Democrats voted against final passage, three voted for repeal, many are open to rescinding specific provisions and even some Democratic pollsters have the law. This thing must be touching multiple nerves.

Many Americans believe ObamaCare claims a power Congress should not and does not have. A government that can make us purchase health insurance can make us buy or cigarettes. The idea that Congress’ power to “regulate” commerce somehow includes the power to compel commerce does not sit well with the structure and purpose of the Constitution.

Others see it as a barrier to better, more affordable, health care. A similar law in Massachusetts led to , , , , and has .

Many believe the law is overkill. Its have attracted a measly , rather than the projected 375,000 — suggesting it was not necessary to conscript 200 million Americans into a compulsory health insurance scheme to solve that problem.

Projections that ObamaCare will permanently eliminate — not to mention any temporary job losses — strike fear in those who have been battered by the recession.

Finally, many Americans are taking this law personally. The president promised he would “,” but then made backroom deals with the drug lobby and Wal-Mart while Senate Democrats used tax dollars to . They watched Health and Human Services Secretary Kathleen Sebelius who disagreed with her. They saw their tax dollars buy ads where Andy Griffith uses “” to mislead seniors. They hear Obama continue to say things they know are untrue, and that non-partisan observers or his own advisers have discredited — like ObamaCare will allow Americans to , . First the individual mandate , then it , then it . At a certain point, people start to feel insulted.

Newt Gingrich Congress will repeal ObamaCare in 2013. Agree or not, you have to be struck by how plausible his prediction is.

is director of health policy studies at the Cato Institute and coauthor of

.

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So This Is Freedom? They Must Be Joking.

Michael F. Cannon — Mon, 07 Mar 2011 06:15:00 +0000

Amid protests from the nation’s governors over the costs of President Barack Obama’s health law, often known as , the president announced last week he is willing to give states more flexibility to implement it. As proof, he endorsed a by Sens. Ron Wyden, D-Ore., and Scott Brown, R-Mass., that would in fact do just that.��

If you think that means the president was himself exhibiting flexibility, you would be wrong.�� Despite the rhetoric about compromise, what the president actually did was offer states the option of replacing his law with a single-payer health care system three years earlier than his law allows.

ObamaCare already allows states to apply for a five-year “waiver for state innovation.” If the secretary of Health and Human Services approves the waiver, then in 2017 a state can use the subsidies its residents would have received to launch its own approach to reform. The Wyden-Brown bill simply moves that date up to 2014.

Echoing the law’s , industry analyst Robert Laszewski called Obama’s endorsement a “” moment for opponents, who must now either prove that their reforms perform better or quit their complaining.

If only.

Any waiver process that amends federal laws on a state-by-state basis — such as advanced in 2006 by the Brookings Institution and the Heritage Foundation, and introduced as legislation by then-Sen. George Voinovich, R-Ohio, and still-Sen. Jeff Bingaman, D- N.M. — will inherently favor big-government proposals over free-market reforms. For example, states seeking more-coercive approaches would have an easy time meeting whatever performance metrics the federal government sets. They can simply ramp up the mandates and subsidies until coverage levels or health plan offerings meet the targets. Since a free market caters to consumers’ preferences, which may deviate from the government’s performance metrics, it would be far more difficult to get free-market approaches approved or renewed.

Constitutional constraints would also block free-market reforms. Any effort to reduce health care costs using market forces would have to reform the federal and the program’s method of subsidizing coverage. Altering the payroll-tax treatment of health insurance in some states but not others would run afoul of : “all Excises shall be uniform throughout the United States.” Allowing states and HHS to rewrite the tax code or the Medicare statute would run afoul of Article I, Section 1: “all legislative powers shall be vested in a Congress of the United States.”

ObamaCare goes the extra mile by only permitting approaches that are more coercive than itself.��Its waiver provisions only apply to that law’s private-insurance provisions, and states to preserve the law’s price controls prohibiting health rating, to cover the same number of people, and to provide coverage as comprehensive and subsidies as large as the new law does.��These restrictions completely bar free-market reforms.

For example, if you ask me, a free market could cover as many people as ObamaCare. (At a minimum, it would provide better access to care. I’ll save the “how” for another column.) But imagine trying to demonstrate that a free market — where the idea is generally to let people spend their own money on as much or as little health insurance as they please — would cover as many people as a law that forces them to buy coverage under penalty of law. A government that believes it had to use coercion to reach that baseline is unlikely to certify that freedom will do the same.

The New Republic‘s Jonathan Cohn agrees, writing that Wyden-Brown “wouldn’t allow [Republicans] to enact the sorts of health care reforms they would prefer.” Moreover, “Virtually any workable state system relying primarily on private insurance would end up looking something like the scheme envisioned by the overhaul: Prohibiting insurers from discriminating against the sick, compelling people to obtain insurance and then providing subsidies so that everybody could afford coverage.”

The only reason to apply for a waiver would be if governors wanted to ramp up the coercion to establish a single-payer health care system. Only in Washington is it considered an act of political compromise when the president encourages people who don’t like his policies to adopt policies they like even less.

HHS Secretary Kathleen Sebelius has written that ObamaCare gives states “” to implement the law. We now know what she meant: states are free to coerce their residents even more than ObamaCare requires. What’s incredible is that she calls that freedom.

Michael F. Cannon is director of health policy studies at the Cato Institute and coauthor of
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All Governors Should Just Say No To ObamaCare

Michael F. Cannon — Tue, 22 Feb 2011 00:30:16 +0000

So far, two Republican governors Florida’s Rick Scott and Alaska’s Sean Parnell have announced they will implement no part of ObamaCare. In the interest of both principle and practicality, the other 48 governors should follow their lead.

Governors are understandably confused about their obligations under ObamaCare. When federal Judge Roger Vinson last month in Florida v. HHS that the entire law was unconstitutional, he apparently wasn’t clear enough about what his ruling meant.

Vinson granted “declaratory relief” to the plaintiffs, who include 26 states, the National Federation of Independent Business (which represents small businesses) and two individual citizens. Though he did not issue a formal injunction forbidding the federal government to implement or enforce the law, Vinson wrote that declaratory relief is the “functional” and “practical equivalent” of an injunction. Declaratory relief, Vinson wrote, “is adequate and separate injunctive relief is not necessary.”

The Obama administration disagrees, and last week Vinson, essentially, “Didn’t you really mean that we can keep implementing and enforcing the law while we appeal your ruling?”

We may not learn Vinson’s answer for weeks, and even then ObamaCare’s legal status won’t be resolved until it reaches the Supreme Court a year or more from today. Yet governors have to decide what to do right now.

Choosing the right course of action is simple for governors who believe ObamaCare is unconstitutional. Every governor takes an oath to support the U.S. Constitution. Implementing a law they believe to be unconstitutional would violate that oath.

At a minimum, then, governors who believe ObamaCare is unconstitutional have a solemn obligation not to implement it.��Parnell wisely sought from his attorney general about whether implementing ObamaCare would violate his oath of office. But if Parnell personally believes the law is unconstitutional, then that should tell him what he needs to know.

Swearing an oath to support the Constitution also obligates governors to use lawful means to prevent its unlawful abuse. Governors who believe ObamaCare to be unconstitutional are as duty-bound to stop implementing the law as they are to challenge it in court.��

Georgia Gov. Nathan Deal (R), who is among the Florida plaintiffs, disagrees. His spokesman that refusing to implement ObamaCare “would put us too far behind if our litigation is not successful in the end.” But implementing ObamaCare entrenches the law’s countless subsidies, regulations, and bureaucracies, meaning that Deal himself is making it harder to discard a law that he considers unconstitutional. With friends like that, the Constitution hardly needs enemies.

Deal and 20 other governors recently sent a to HHS Secretary Kathleen Sebelius, complaining of ObamaCare’s “constitutional infringements” and requesting greater flexibility to implement it. Since (by design) there is zero chance that Sebelius will accede, those governors should flatly refuse to implement any part of the law. They won’t be alone.

Last week, Parnell , “The state of Alaska will not pursue unlawful activity to implement a federal health care regime that has been declared unconstitutional by a federal court.”

Many reporters missed the fact that Parnell is the second governor to take this stand. Shortly after taking office, Scott he will not implement the law until the Supreme Court considers the matter. “[The court] called it unconstitutional,” Scott recently an audience of Floridians. “We’re not going to put any effort into implementing that, and I think every other state ought to do the same thing.”

One of Scott’s first acts as governor was to $2 million that the Obama administration gave his predecessor, Gov. Charlie Crist (R), to help implement the new law. (Disclosure: I served on Scott’s transition team.)

Wisconsin and New Hampshire have also ObamaCare money to the federal government, which highlights the practical reasons why governors should refuse to implement ObamaCare.

It is the height of fiscal irresponsibility to be making new spending commitments (1) when the federal deficit is and state budget deficits are a cumulative , (2) when those new commitments create a framework for a massive new entitlement program, and (3) when that new spending comes under the auspices of a law that has been invalidated by one federal court and may be invalidated by the nation’s highest court.

Whichever reason they choose — fiscal responsibility or fealty to the Constitution — America’s governors should just say “no” to implementing ObamaCare.

Michael F. Cannon is director of health policy studies at the Cato Institute and coauthor of Healthy Competition: What’s Holding Back Health Care and How to Free It.

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