For Good Public Policy Health

by John Hood

With health care issues playing an outsized role in North Carolina politics right now, I strongly urge Carolina Journal readers to put John Goodman’s recent book Priceless: Curing the Healthcare Crisis on your e-reader or reading stack. You won’t be sorry.

Goodman, an economist and president of the Dallas-based National Center for Policy Analysis, has been one of the country’s leading experts on the economics of health care for more than two decades. Back in the 1990s, his work on patient power and perverse incentives in the delivery of medical services helped set the stage for the creation of health savings accounts and the larger revolution of consumer-driven health care.

In Priceless, Goodman discusses this revolution and many other topics related to health care reform. While you might not agree with every proposal he offers, you will learn a great deal about health care policy along the way. Here’s a sampler, which in the spirit of the title I will offer without charge:

• American life expectancy is lower than that of many other developed countries, but the discrepancy isn’t attributable to the health care system. If you control for fatal accidents, homicides, and suicides, thus confining your analysis to deaths by other causes, American life expectancy is at or near the top of the list.

• The billing system that underlies Medicare and other third-party payers for medical care is fundamentally at odds with common sense and fiscal responsibility. For example, patients with special needs account for a significant percentage of the annual Medicare budget, costing an average of $60,000 a year. Most of these patients have multiple diseases or conditions. But Medicare will pay physicians the full amount for treating only one condition per visit. To maximize their revenue, physicians require patients to return for multiple visits so they can bill separately for each condition.

• Much of the projected cost savings associated with Obamacare over the next decade is expected from the expansion of electronic medical records, evidence-based care, preventive care, and “medical home” coordination of care. Do these ideas, whatever their merits for patients, actually reduce cost? Not according to most available research. The Congressional Budget Office recently compiled the evidence and predicted meager savings, if any.

• Much of the rest of the cost savings associated with Obamacare over the next decade are based on the assumption of massive reductions in Medicare reimbursements to hospitals, doctors, and other providers. But Congress always rolls back such proposed cuts, and will likely do so in the future. That’s one reason why it is silly to suggest that Obamacare will result in lower federal budget deficits. Estimates to that effect from government agencies such as CBO assume the law will be implemented as written, even though such a scenario is highly unlikely.

• Medicare has been a great deal for previous generations of Americans who paid relatively little into the system via taxes and premiums and then benefitted from the rapid improvement in medical technologies, treatments, and pharmaceuticals over the past three decades. Current recipients aged 85 and older have “gotten back” more than $2.50 in benefits for every dollar put into Medicare during their working lives. If you are 65 today, expect to get $1.26 back for every $1 spent. If you are 45 today, Medicare will end up costing you more than you get back. If you are 25 today, expect to get only 75 cents on the dollar.

• Keep in mind that expanding Medicaid doesn’t simply extend health-insurance coverage to people who were previously uninsured. It also induces employees, and some employers, to drop private plans and shift the cost to taxpayers as a whole. For example, for every dollar spent on Medicaid expansions back in the 1990s, between 50 cents and 75 cents went to fund medical services that would otherwise have been funded privately, rather than to fund new services to the previously uninsured. Also, Medicaid expansions are almost always followed by large increases in emergency-room visits, not decreases.

See what I mean? Just about every page of John Goodman’s Priceless offers something that challenges the conventional wisdom, improves your understanding of health policy, or at least makes you think. Highly recommended.

John Hood is president of the John Locke Foundation and an NC Spin Panelist