Barry is a Senior Economist with the National Center for Policy Analysis, one of the most influential think tanks in America today.
The National Center for Policy Analysis (NCPA) is a nonprofit, nonpartisan public policy research organization, established in 1983. The NCPA's goal is to develop and promote private alternatives to government regulation and control, solving problems by relying on the strength of the competitive, entrepreneurial private sector. Topics include reforms in health care, taxes, Social Security, welfare, criminal justice, education and environmental regulation.
NCPA Motto - Making Ideas Change the World - reflects the belief that ideas have enormous power to change the course of human events. The NCPA seeks to unleash the power of ideas for positive change by identifying, encouraging, and aggressively marketing the best scholarly research.
Daily Policy Digest
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Daily Policy Digest
- California's Surprise Medical Bill Law Papers Over A Systemic Problem
- 21 Oct 2016 07:00:58 CDT -
(A version of this Health Alert by NCPA Senior Fellow John R. Graham was published by Fox & Hounds.)
Insured patients who go into a hospital for scheduled surgery are often shocked to find they owe bills well beyond what they expected to pay, especially if they understood the hospital and surgeon to be in their health plan's network. The problem usually occurs when an anesthesiologist or other specialist involved in the procedure is not in the insurer's network. Until now, when it came to the amount the out-of-network specialist could charge, the sky was the limit. A recent Consumers Union survey found nearly one third of Americans who had hospital visits or surgery in the past two years were charged an out-of-network fee when they thought all care was in-network.
The new law, AB 72, which was proposed by Assemblyman Rob Bonta, addresses this problem with two new regulations. First, a patient cannot be charged more out of pocket (deductible or co-pay) by a specialist who is out of network versus one who is in network. Further, the total charge (most of which is paid by the insurer) will be limited to 125 percent of the amount Medicare pays for the same procedure.
As a finger in the dyke, the law is okay. By increasing the rate to 125 percent of Medicare's fees from a previously proposed 100 percent, the bill defused organized medicine's opposition. Doctors often exaggerate how much insurers negotiate their rates down. Complaining about contracts offered by insurers, a surgeon told Casey Ross of STAT News: "Insurers won't negotiate with us. They tell us, 'Take it or leave it. Here's what we're going to give you,'" adding that insurers might offer 90 percent of the Medicare reimbursement rate.
This is hard to swallow. Although there are idiosyncratic cases where private insurers pay doctors less than Medicare does, private insurers pay significantly higher fees than Medicare does, on average. A freshly published study of doctors' claims in Texas using 2013 data showed private payers paid fees ranging from 148 percent to 235 percent of Medicare's fees for facility-based services.
So, AB 72 will likely encourage some more specialists to sign contracts with insurers, in order to avoid getting paid 125 percent of the Medicare rate. And it will likely reduce patients' problems with surprise bills. However, it will not get rid of our medical billing mess because it ignores the fundamental, systemic problem: Patients control an almost insignificant share of the dollars spent on our health care. Only about ten cents of every dollar spent on our health care is spent directly by us. The rest is controlled by insurers or governments (while we pay indirectly through premiums and taxes).
No wonder out of network specialists can inflict so much financial anxiety on patients in such an off-hand, almost careless way. They really do not have an incentive to worry about the pain they cause patients' pocketbooks, because their incomes do not depend on ensuring a patient is able and willing to pay his bill in a relatively frictionless way.
Imagine if other service businesses operated like this. Remember when President Obama was trying to convince us that the Obamacare health-insurance exchanges would operate like Expedia or Travelocity? It is laughable in hindsight. Nevertheless, while most people agree that actual airline travel (which is regulated by the federal government) is miserable, buying a ticket to fly is a convenient and transparent process. A passenger does not get a bill from the co-pilot a month after his flight, stating the co-pilot was not in the airline's network, and the passenger must pay extra!
There is no reason all charges for hospital care cannot also be clearly communicated and accepted upfront. This is the way medical tourism works: Foreign patients agree to a fixed charge for all services associated with a procedure. Overseas hospitals know they have to operate this way to attract direct-paying international patients who do not have entire departments (like insurers do) to wrangle with hospitals and specialists over minutely detailed and confusing fee schedules.
A real solution to the problem of surprise medical billing will only come when Americans demand a very different healthcare payment system; whereby insurers indemnify patients for catastrophic costs, and hospitals and specialists depend on patients directly for their incomes.
For more on Health Issues:
- What NCPA Experts Said about Last Night's Debate
- 20 Oct 2016 07:00:57 CDT -
Here's a short overview of their responses to the Trump/Clinton face off last night:
NCPA Senior Fellow Pamela Villarreal:
"The candidates discussed policy, but neither were very familiar with their own tax and economic plans! Hillary Clinton's plan will produce less of a 10-year deficit than Donald Trump's plan, but her tax increases will only cover half of her proposed $1 trillion in new spending. Trump's plan will no doubt grow the economy but will leave a deficit of $7 trillion over 10 years. Both candidates need to face that fact that spending cuts are in order. Even a robust economy will not cover a multi-trillion deficit, and anticipated revenue from tax increases will be less than expected. As far as entitlements, again, Donald Trump's pro-growth policies and Hillary's tax increases will not make Social Security and Medicare solvent over the long run. These are band-aid approaches that ignore real reforms."
NCPA Executive Director Allen West:
"There are truly two critical issues for the American people -- economic growth and national security. When it comes to trust in our government, it is at an all-time low and we need to restore our rule of law and not create a SCOTUS that is used to advance ideological agendas. The decision about what type of country we shall be is truly in the hands of the American people. The seminal question that should have been posed this evening is, 'How do you define liberty?' We are just three weeks away from determining how we shall advance liberty and empower Americans -- not just a politically and ideologically determined few."
Health Economist and NCPA Senior Fellow Devon Herrick writes:
"The previous debates virtually ignored Obamacare. This debate was no exception. Health care is arguably the one topic that effects all Americans. The rising cost of medical care is something that rivals mortgage payments for most Americans. When will the candidates talk about the issues that effects all Americans' lives?"
NCPA Legislative Director Brian Williams:
"Debt. Entitlements. Immigration. Economic growth. Supreme Court. Foreign hot spots. Fitness to be President. Those were the topics on the agenda for last night's debate. The debate touched on each of those topics (some more fleetingly than others), but a substantive examination of the topics, let alone an outcome, failed to materialize. Instead, the bulk of the debate was spent using the policy topics to sling insults at each other. The morning-after conversation was shocked that Donald Trump talked about rigged elections instead of conceding right there on the debate stage. But even MSNBC's Morning Joe acknowledged the long history of partisan bickering about rigged elections (https://youtu.be/1K5Kw_snIes). In the end, the debate probably didn't move the electoral needle either way. For Americans interested in policy, the debate was probably a waste of time. Who won last night's debate? In my opinion, the winner was Chris Wallace, who was the best moderator of all the debates this year."
For more on Economic Issues:
- Will Tonight's Debate Delve Into Policy, or Am I Asking Too Much?
- 19 Oct 2016 07:00:56 CDT -
Senior Fellow Pam Villarreal writes at NCPA's Retirement and Taxes blog:
The last two debates have been dreadfully disappointing as far as the candidates addressing any substantive economic issues. Based on studies from the NCPA's Tax Analysis Center, Clinton's and Trump's economic plans produce vastly different results. This is not surprising, of course, since these plans are predicated on different visions for the economy. Mrs. Clinton wants to promote a fair economy where the rich pay more taxes, and Mr. Trump wants an economy that can squeak out a growth rate of more than the paltry 1 to 2 percent under the current administration. In an ideal world, an effective moderator that can maintain control without cheerleading one side or the other might ask these questions of the candidates.
For Hillary Clinton:
- You have repeatedly promised to "unleash the power of the private sector." This implies that under the current administration the private sector is "leashed" in a way that it cannot operate freely and effectively. What leashes that have been imposed by the current administration do you plan on removing from the private sector?
- In the same breath of touting the importance of the private sector, you also wish to hike taxes on capital investments to a top marginal rate of 47.4 percent for wealthy investors. Since business growth relies on capital, how do you reconcile your pro-private sector stump speech with your actual tax plan?
- You have indicated your desire to expand Social Security, but an NCPA analysis of your tax plan shows that payroll tax revenues will fall over the next 10 years because fewer people will be working. How do you plan on paying for your Social Security expansion?
- You have indicated your wish for more stimulus spending -- albeit on a smaller scale than Obama's $830 billion stimulus package -- to build and repair infrastructure and grow the economy. This sounds much like Obama's stimulus claim, yet much of the previous money was wasted on things such as anti-capitalist puppet shows, a turtle tunnel in Florida and subsidizing several green energy companies that eventually filed for bankruptcy. How do you plan on spending your proposed stimulus and what do you say to those who have found the multiplier effect to be vastly overstated?
For Donald Trump:
- Like Mrs. Clinton, you believe that carried interest should be taxed as ordinary income, not at the lower capital gains rate. This means that without lower personal income tax rates, carried interest could be taxed at a rate as high as 43.4%. How will that encourage investment?
- You have spoken out often against free trade, and have described the North American Free Trade Agreement (NAFTA) as a "disaster." However, U.S. jobs and exports have grown dramatically since its implementation. What parts of NAFTA do you consider to be a disaster?
- You have also called for an import tax of 20 percent, 35 percent of even 40 percent, depending on the source. Last year, your own economic advisor Stephen Moore co-authored a column in which he called your 35 percent tariff proposal "worrisome in the extreme." Which of you will prevail on this issue should you become president?
- Finally, an NCPA analysis of your tax plan shows that it would spur economic growth, investment and personal income growth over 10 years far beyond CBO baseline estimates, but would increase the deficit by $7 trillion over 10 years compared to CBO estimates. Do you plan on cutting federal spending? If so, in what areas?
Of course, I am betting that this Q&A session is not going to happen on Wednesday night. But there is always hope.
For more on Economic Issues:
- Mixed News on Generic Drug Approvals
- 18 Oct 2016 07:00:55 CDT -
Senior Fellow John R. Graham writes at NCPA's Health blog:
A response to expensive patented medicines is generic competitors. The U.S. has struck a pretty good balance between innovation and low prices through the Hatch-Waxman (1984) Act, which specified patent terms for newly invented medicines, and a pathway for generic competitors to enter the market after a period.
One obstacle to generic entry in recent years was a very slow approval process at the Food and Drug Administration. This led to a backlog, which was unexpected because one important benefit of Hatch-Waxman was that generic competitors did not have to replicate the expensive clinical trials innovative drug-makers had to carry out to receive the FDA's approval.
The FDA's Office of Generic Drugs (OGD) considers approving generic copies of drugs upon receipt of an Abbreviated New Drug Application (ANDA) from the manufacturer. The system changed under a law passed in 2012, the Generic Drug User Fee Act (GDUFA). Recent data show improvement:
OGD's final numbers for approvals and receipts and a few other metrics for the full FY 2016 were released today. OGD approved 51 ANDAs in September for a total of 651 for FY 2016, an average of 54.25 ANDA a month. This represents the largest number of approvals in a fiscal year in (at least) the last 8 years (and likely longer) and is the most approved under GDUFA I (previous GDUFA high was 492 which was achieved in FY 2015 and 517 in FY 2012 prior to GDUFA). That's the good news! The bad news is that OGD received a total of 853 ANDA (71/ANDAs/mo) in FY 2016 which is 202 more ANDA than it approved. It is true there were also 184 tentative approvals in FY 2016 but that still leaves OGD a little short on the balance sheet.
However, because the 2012 law attracted an increase in new applicants, it is not clear the backlog has improved, despite OGD having hired almost one thousand new employees to process ANDAs.
The change GDUFA introduced was to make generic drug-makers, instead of taxpayers, fund the approval process. In one respect, this is good, because the users pay for their own regulatory process, privatizing a cost that had been socialized.
Manufacturers' payment of user fees increased the OGD's revenues. However, because the regulatory monopoly remains in place, it consumes the revenue without becoming more productive. Further reform would allow multiple pathways to allowing patients to use safe generic drugs, without threatening investment in innovation.
For more on Health Issues:
- Government and the Cost of Dental Care
- 17 Oct 2016 07:00:54 CDT -
Senior Fellow John R. Graham writes at NCPA's Health blog:
In July 2015, former Enron board member, New York Timescolumnist, and champion of ever more government control of health care, Professor Paul Krugman, wrote a disturbing blog entry:
Wonkblog has a post inspired by the dentist who paid a lot of money to shoot Cecil the lion, asking why he -- and dentists in general -- make so much money. Interesting stuff; I've never really thought about the economics of dental care. But once you do focus on that issue, it turns out to have an important implication -- namely, that the ruling theory behind conservative notions of health reform is completely wrong.
For many years conservatives have insisted that the problem with health costs is that we don't treat health care like an ordinary consumer good; people have insurance, which means that they don't have "skin in the game" that gives them an incentive to watch costs. So what we need is "consumer-driven" health care, in which insurers no longer pay for routine expenses like visits to the doctor's office, and in which everyone shops around for the best deals.
Krugman goes on to insist dentistry is a consumer-driven market: Insurance is far less prevalent in dentistry than in medicine, and most dental care is routine and preventive. Yet, he points out, costs of dental care have risen at the same rate as those of other health care, not at the rate of other consumer goods and services.
With respect to prices (an important factor in cost, but not to be confused with cost), Professor Krugman is not quite right. In the Consumer Price Index, the price of going to a dentist rose 2.8 percent in the twelve months to August 2016, versus 4.3 percent for going to a doctor. The price of services other than medical services rose 2.8 percent, so dentistry does not seem out of line. On the other hand, the price of seeing "other medical professionals" rose only 1.3 percent, and prices for all items less medical care rose just 0.7 percent, so it certainly looks like something might be going on in dentistry that needs reform.
What Professor Krugman missed was the supply side of dentistry, not the demand side. "Other medical professionals" includes professions like physical therapist, which some describe as "midlevel." Dentists' state licensing boards, however, have excluded midlevel practitioners who can provide some services at lower cost.
The Pew Charitable Trust have researched and advocated for solving this with dental therapists:
… midlevel providers similar to physician assistants in medicine--[who] deliver preventive and routine restorative care, such as filling cavities, placing temporary crowns, and extracting badly diseased or loose teeth. As states grapple with provider shortages, especially to serve vulnerable populations, a handful have acted to allow dentists to hire these practitioners, and many others are exploring the option.
So, price competition in dentistry is not due to a lack of government controlling demand, but of government having limited the supply of less expensive options. Hopefully, that is changing.
For more on Health Issues:
- Values: The Foundation of our Culture and Economy
- 14 Oct 2016 07:00:53 CDT -
The following NCPA column appeared in Townhall:
Economic indicators point to the possibility of yet another financial meltdown, perhaps worse than the United States experienced in 2008. Household debt has risen to nearly $12 trillion, downward regulatory pressure on businesses recently reached $6 billion, and the current recovery remains the slowest in the post-World War II era. The numbers look bleak. But those are symptoms of a larger ailment.
Our country is experiencing an ethical malaise that has inspired a value-neutral and morally relative leadership model that continues to negatively impact government policy, business and families. We as a community bemoan public corruption but fail to promote the values that might have prevented it. The illogical conclusion that a Bible can be read in prison but not in school is akin to the old English saying, "The beatings will continue until the morale improves."
A lack of adherence to an ethical code of conduct was at the root of faulty decisions leading to the financial crisis in 2008. From government to banking, credit raters to home buyers, an absence of honesty, integrity and fiduciary duty at the highest level allowed for a near collapse of America's financial market.
The 2008 meltdown should have taught us that our livelihood rests on more than numbers and spreadsheets. It should have reminded us that neither regulation nor a lack thereof can engender principled behavior. Instead, these events exposed our culture's growing indifference to moral convictions; our growing dependence on modern day trends to determine truth. Indeed, some discredited values of honor, truthfulness and integrity as ancient and stale. But how can we as a country fail to promote those values and then express shock when the system fails us? Famed author and Oxford Don C.S. Lewis reminded us that we all too often laugh at honor and are then surprised to find traitors in our midst.
Morality is inherently stamped on our souls and connects us with that which we hold in most reverence. It guides our individual actions. It determines our community. Reasoning away absolute truth leads to a self-centered worldview, which breeds confusion and chaos. As Pogo opined years ago, "the number one enemy is us. Character requires a reality that is larger than us." Leadership must do what is right, when it is right, because it is right.
American businesses faced a difficult stretch after the bankruptcy of Lehman Brothers, the great recession and the near collapse of the world's financial structure. Businesses became the target of shrill rhetoric and finger pointing from the White House and Capitol Hill. The atmosphere encouraged a bashing of the entire free enterprise system.
Except for those companies responsible for the system of easy credit and disguised risk, American business has nothing for which to apologize. Instead, it must make the moral and ethical case for free enterprise as a system that has lifted more people out of poverty and created more wealth than any other system in history.
Outside the family, churches and communities, the marketplace is the vanguard for moral truths in a free-market society. Economic freedom makes it incumbent beyond anyone involved in business, from a fortune 500 company to a family-owned bakery, to live by a creed that betters both themselves and the people around them. Business leaders must live by moral convictions and clear principles that guide their company's operations. This strategy, in turn, positively influences the surrounding community. As business expert and author of Values, Inc., Dina Dwyer-Owens observes, a public ethos can only begin in a company that privately practices a code of values.
Sadly, this current malaise has imbued our children, our country's future leaders, with false expectations. We are asking the next generation to return to a value-based society that has not existed in their lifetime. Moral clarity rooted in truth, integrity and faith remains the bedrock of loving homes, successful businesses and a functioning society. We must promote that. The continued teaching of moral relativism and humanistic thinking will only confuse truth.
To paraphrase Bertrand Russell: values are not a matter of taste and perception, but exact and understandable. Such an understanding does not eliminate risk. But a clear set of values can help avoid self-induced destruction as we so recently experienced. We will not act on what we do not believe. We need to prepare for the battles to come: For if the trumpet give an uncertain sound, who shall prepare himself for the battle?
Cary Maguire is CEO and President of Maguire Oil Company and Components Corporation of America, founder of SMU's Maguire Center for Ethics & Public Responsibility and one of the leading philanthropists in Dallas.
NCPA President/CEO James H. Amos, Jr. grew Mail Boxes Etc. into the world's largest and fastest growing franchisor of retail business, communication and postal service centers when he was CEO. He is in the International Franchise Association's Hall of Fame, is a decorated Marine Corp veteran and author of several best-selling books.
Dr. David Grantham is a Senior Fellow and Project Manager of the Financial Crisis Initiative at the National Center for Policy Analysis. He holds a PhD in history from Texas Christian University.
For more on Government Issues:
Health Policy Digest
Provided courtesy of: http://www.ncpa.org/
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