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.


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California Single-Payer Bill Looks Backward, Not Forward to New Era of Patient Choice

27 Mar 2017 07:00:58 CDT –

Senior Fellow John R. Graham writes at NCPA’s Health blog. A version of this Health Alert was published by the Orange County Register.

Here we go again. The California state legislature is considering yet another bill to impose a so-called single-payer, government monopoly, health care system. This has long been an obsession of the militant California Nurses’ Union, because a health system under total government control would suit the narrow interests of union leaders. They would accrue power similar to that wielded by other public-sector unions and might even be able to negotiate contracts similar to those enjoyed by state and local employees, which are driving public finances across the state into the ditch.

However, a government take-over would not be good for Californian patients. The single-payer ideology overwhelmed Canadian health care decades ago, where militant unions invest significant resources in preventing reforms patients need to improve their access to health services. Our Northern neighbors suffer unacceptable delays in getting medically necessary treatment. According to a 2016 study by The Fraser Institute, it took an average of 20 weeks for a patient to receive treatment from a specialist after referral by a primary-care doctor. This has deteriorated significantly from 9.3 weeks in 1993, the first year the study was published. The worst delay is for neurosurgery, for which the average wait was 46.9 weeks last year.

And those waiting times are after a patient’s primary-care doctor refers her to a specialist. However, about one in seven Canadians does not even have a family doctor! Access to lifesaving medicines is similarly poor. According to a recently published study conducted by researchers at the University of Pittsburgh, the U.S. Food and Drug Administration approved 45 anticancer drugs from 2009 through 2013, while only 34 were approved in Canada. While Medicare covered all 45 drugs, government programs in Canada covered only 15.

California’s single-payer advocates argue government monopoly would be “Medicare for all,” but that is not the case. Medicare beneficiaries do not (yet) suffer limited access to specialists because it is paid for by working-age people who finance Medicare’s spending on people aged 65 and older. As the baby boomers retire, this financing mechanism will fail and more Americans will recognize the need for significant reforms to Medicare.

Medicare Part D, which covers prescription drugs, is offered by private insurers which submit bids to the federal government for the privilege of offering the benefit to Medicare beneficiaries. This element of competition protects seniors from direct government rationing of innovative new medicines. It would disappear under California’s single-payer proposal.

Economic growth in California would also suffer, because investment in medical innovation flees when government rations patients’ access to new therapies. According to another Fraser Institute study, investment in pharmaceutical research and development in Canada shrank 20 percent between 2001 and 2015. In California, on the other hand, the life sciences industry has grown so dramatically it employs more workers than traditional California industries such as aerospace, electronic-equipment manufacturing, or telecommunications, according to a 2014 report by PriceWaterhouseCoopers. Many of these high-paying jobs would disappear if California adopted a single-payer system.

A single-payer health system would not look like “Medicare for all,” but Medi-Cal, the state’s welfare program for low-income residents’ health care. A 2013 study found only 54 percent of office-based physicians accepted Medi-Cal patients. Another found only 36 percent of psychiatrists would accept Medi-Cal patients.

Rewarding failure, Obamacare increased federal funds to enroll newly eligible people in state Medicaid programs, which has resulted in almost one third of California’s 39 million people becoming dependent on Medi-Cal. The number increased from 7.8 million in 2013 to 12.1 million last November. However, the federal handouts are not free. In his 2016-2017 budget, Governor Brown asked for an eight percent increase in Medi-Cal funding from 2015-2016. This $19.1 billion would cover a caseload now estimated at 13.5 million people.

This bloated Medi-Cal program is living on borrowed time. The new President and Congress have pledged to repeal and replace Obamacare with a health reform that will give states more flexibility in how they deliver Medicaid to low-income households. This will include a cut in federal payments, but also unprecedented options to explore better ways to deliver care to the least advantaged patients with less bureaucracy. One example is Health Opportunity Accounts, which would allow Medi-Cal patients themselves to decide which health services should be paid for.

Instead of wasting time fantasizing about imposing a single-payer government monopoly over Californians’ access to health care, California’s politicians should look forward to taking advantage of these new ways to deliver care within reasonable budget constraints.


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Don’t Gut the Texas Workers’ Comp System

24 Mar 2017 07:00:57 CDT –

Senior Fellow Pamela Villarreal writes at NCPA’s Taxes and Retirement blog:

President Trump has some lofty goals for his first year in office, but during his first month in office, he spent ample time undoing many executive orders ushered in by the Obama administration. One particular area of concern was some controversial rules and actions from the Department of Labor.  Former Labor Secretary (now the Democratic National Committee Chairman) Tom Perez expressed concern about workers’ compensation laws in Texas and Oklahoma and called for an investigation.

Workers’ compensation is a government-mandated employee benefit program that covers three types of  benefits when a worker is injured on the job or has a work-related illness.  Each state has its own system, and while features of each system vary, they all must provide coverage of medical costs, replacement of lost wages and payment for death or dismemberment. An injured worker typically receives medical treatments paid for by the employer or employer’s insurance carrier; if the injury results in lost time from work (beyond a statutory waiting period) he or she receives wage replacement (indemnity) benefits; and in cases of permanent injury or death, the worker (or the worker’s family) is compensated.

Texas does not require firms to have workers’ compensation insurance, but instead allows them to manage their own workers’ injuries and benefits. Self-insuring can save firms millions of dollars in workers’ compensation costs that can be spent on other employee benefits and business expansion.

Secretary Perez took a dim view of these nonsubscriber programs, calling them a “pathway to poverty,” based on claims that they pay fewer benefits, limit access to courts and access to medical treatment. Last spring he called for a federal investigation into the Texas plan and, at the time, the Oklahoma plan.  (The Oklahoma plan, which was passed 2013 has since been ruled unconstitutional by that state’s Supreme Court.)  Texas is now the only state that allows employers to choose not to subscribe to the very expensive workers’ compensation insurance system.

Recent media reports have accused the Texas opt out system of denying treatment and benefits that allegedly push injured workers into poverty. However, workers who allege lack of treatment and compensation for workplace injuries are not solely the outcome of opt out systems.  In Washington, workers at the Hanford cleanup site, owned by the Department of Energy, have complained about denial of medical treatments after being exposed to radioactive waste.  The California’s workers’ comp system has been accused of denying victims of the San Bernadino terrorist attack medical and psychological treatments.  In other words, the traditional workers’ compensation model is flawed, and the Texas model may be the solution for other states.

For decades, researchers have found a myriad of disincentive effects associated with state workers’ comp insurance systems that keep workers off the job for too long and on an eventual path to dependency on the Social Security Disability Insurance (SSDI) system. Since SSDI pays a little less than a worker’s Social Security benefit, it is by no means a path to prosperity.  The most common reasons for workers’ comp claims are not obvious injuries that demand immediate medical attention, but musculoskeletal disorders, such as latent low back pain that develops from an injury.  Two years ago, researchers from the University of Massachusetts-Lowell and the Center for Disability Research examined workers’ comp claims of low back pain from 49 states.  They found significant differences in cost and length of disability based on states’ workers’ compensation provisions.  For instance, in states that allowed employers choose the initial health care provider for the injured worker, average medical costs per injured worker were slightly lower.  Higher wage replacement rates were also associated with higher medical costs (in the U of M study, the average wage replacement rate was 68 percent).  States with limited choices in health care provider had a lower before wages are replaced was associated with an increase in the average length of disability (state average waiting periods ranged from three to seven days), while a shorter retroactive period (the number of disability days before the disabled worker receives benefits that retroactively cover the waiting period) was associated with a shorted length of disability.

While these findings may not convince skeptics of the benefits of nonsubscriber system like the Texas model, here are few more considerations: According to a new report from the Texas Public Policy Foundation, most Texas nonsubscribers offer wage replacement rates of 85 to 100 percent.  Workers’ comp insurance systems typically cap benefits at a lower rate.  Also in the Texas model, 97 percent of employees returned to work within six months, compared to 83 percent in the state’s traditional workers’ comp insurance system.

The one requirement of the Texas nonsubscriber model that rattled the Obama Department of Labor was the 24-hour reporting requirement. Traditional workers’ compensation allows a worker up to 30 days to report an injury.  However, this 30-day reporting requirement can be problematic for an employer who may not be aware that a potential unsafe situation exists in the work environment, leaving open the possibility that another employee could become injured.  The Texas nonsubscriber model requires a 24-hour reporting period with a “good faith” clause, which allows employers to get workers medical treatment at the onset of the known injury and to rectify a potentially unsafe environment quickly.

Finally, unlike traditional workers’ compensation insurance, nonsubscribers are not protected from legal liability, so they are incentivized to provide a safe workplace.

Trump’s appointment for Labor Secretary, Alexander Acosta, is scheduled for his confirmation hearing tomorrow.  If he is confirmed, hopefully he will take a more collaborative approach to employers trying to manage the costs of a system that in many states is out of control while getting injured workers treated and back to work quickly.

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The Logic-Defying CBO Obamacare Replacement Score Breaks Its Own Rules, among Other Problems

23 Mar 2017 07:00:56 CDT –

Dr. Tom Price, the U.S. Secretary of Health & Human Services, has said the Congressional Budget Office’s recent “score” of the Republican Obamacare replacement bill defies logic. Even worse, it defies the very
rules which govern the CBO.

The CBO’s Analysis Is Static. The 2016 Budget Resolution agreed to by both the House and Senate in May 2015 directed the CBO to do so-called dynamic scoring of major legislation. Dynamic scoring includes proposed laws’ macroeconomic effects. It is especially important when new laws cut taxes, as the American Health Care Act would do. Old fashioned, static analysis does not result in accurate estimates.

For example, say a 10 percent tax on a base of $100 million raises $10 million. Cutting that tax to five percent would cut revenue by $5 million, under static analysis. This ignores the economic growth that would occur as a result of the tax cut.

The AHCA eliminates almost all of Obamacare’s taxes. Even according to the CBO’s static analysis, the bill will reduce the federal deficit by $337 billion over 10 years. This combines a spending cut of $1.2 trillion and a cut in tax revenue of $0.9 trillion.

This effect on the federal government disguises the reform’s benefits to real people. The CBO claims it did not have enough time to prepare a dynamic analysis. Fortunately, the National Center for Policy Analysis has just done so. The NCPA’s analysis concludes the AHCA would increase real Gross Domestic Product by $426 billion, or 1.5 percent; increase private sector employment by 940,000, or 0.49 percent; and increase personal income by $185 billion, or 0.76 percent.

Continue reading

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Veterans Health Administration Realizes it Should Buy, Not Build, Software

22 Mar 2017 07:00:55 CDT –

Senior Fellow John R. Graham writes at NCPA’s Health blog:

Imagine if you learned a government agency built its own office furniture, HVAC, or telephones. Even if there were a massive amount of corruption in government purchasing, it would be remarkable if a bureaucracy could do a better job building than buying.

Yet, for decades, the Veterans Health Administration has tried to do that with its Electronic Health Record (EHR). I cannot think of another health system that has built its own EHR, rather than buy it from a vendor. It makes as little sense as a health system manufacturing its own MRI machines.

President Trump’s newly appointed VA Secretary has confirmed he will throw in the towel on the VA’s home-brew system, VISTA, and buy a commercial EHR. Back in 2014, the VA and Department of Defense scrubbed a failed project to make their EHRs interoperable — after churning through $24 billion of taxpayers’ money in a vain attempt to overcome turf wars between and within the departments.

The reason it took so long for the VA to take this step is the VISTA EHR was cutting edge in the late 1990s. At the time, the installation was led by an idiosyncratically outstanding leader, Dr. Ken Kizer, from 1994 to 1999. Then, he went to the private sector.

VISTA began to track towards obsolescence pretty quickly. However, absent market forces, the VA could not make an effective “build or buy” decision for almost two decades.

Buying a commercial EHR will not solve the VA’s crisis, but least it is a sensible step.

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The “Troubles” with Pharmacy Benefit Managers

21 Mar 2017 07:00:54 CDT –

Senior Fellow Thomas Hemphill writes in Regulation Magazine:

Whenever U.S. policymakers and business executives discuss health care, the issue of ever increasing costs quickly arises. And for good reason. According to a recent analysis by the Kaiser Family Foundation,
U.S. per capita expenditures on health care are expected to increase from $9,695 in 2014 to
$15,618 in 2024, an average annual growth rate of 5%.

Drug therapy, compared to hospital treatment and surgical procedures, is often the most efficient form of medical treatment.  But it is costly nonetheless. For 2014, prescription drug costs made up 9.8% of total annual health care expenditures, with total retail prescription drug spending accounting for $297.7 billion.
That is a 12.2% increase over 2013.

To hold drug costs down, many private employers, insurers, and even states and the federal government use pharmacy benefit managers (PBMs). PBMs are third-party administrators of prescription drug programs. Some 266 million Americans — approximately 82% of the total U.S. population — are covered by these programs as part of their commercial health plans, self-insured employer plans, Medicare Part D plans, the Federal Employees Health Benefit Program, state government employee plans, and Managed Medicaid plans.

Continue reading.

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Great Moments in Government Waste, Fraud and Abuse

20 Mar 2017 07:00:53 CDT –

Senior Fellow Pamela Villarreal writes at NCPA’s Taxes and Retirement blog:

Donald Trump’s proposed “skinny budget” was released last week.  Of course, the outrage and howls of indignation have begun.  Already, there are Twitter hashtags referencing cuts to programs for the poor (#Mealsonwheels is trending) and “hair on fire” claims that people and puppies will die because of EPA cuts, education cuts, public television cuts, and of course, the expansion of the “military industrial complex.”

In the era of Trump resistance, there is no such thing as a measured response or a little bit of contemplation.  Every reaction must be emotional, outlandish and knee-jerk with no fact checking involved.   But it’s time to take a breather. Regardless of the reactions of anti-Trumpers or Trump supporters, there are some things about politics and policy that remain a constant: government still wastes lots of money.  And any budget policy that might force agencies to control waste, clamp down on fraud or follow internal controls make government employees a little nervous.  After all, such measures smack of accountability and upend the status quo, meaning that some federal employees may be ushered out the door.

Let’s take a look at some of the goings in a couple of agencies that Trump proposes cutting the most:

Trump proposes cutting the EPA budget about 31 percent.

  • According to the EPA’s Office of Inspector General (OIG), the employee credit card and convenience check system is rife with abuse.  In 2014, the OIG foundthat out a sample of $152,602 in transactions, over half of the amount was for “prohibited, improper and erroneous” purchases.
  • On February 14, 2017, the OIG determinedthat the program’s risk was high enough to warrant an audit.  A review of 18 transactions found that none of them complied with the agency’s 14 internal controls. They also pointed out that “two of the 18 transactions, totaling $14,985, were for fitness memberships improperly paid for in advance.”
  • The OIG also found that EPA’s $10 million “transit subsidy” program for employees for parking or  public transportation is vulnerable to abuse, as employees use their transit cards after they have quit the agency.
  • In another area, EPA often fails to account for grant money awarded to states and  localities for pollution cleanup, and the EPA’s lack of oversight allows groups to spend the money without completing required grant work.  Clean water state revolving funds are not continuously reviewed, resulting in hundreds of millions of dollars in “misuse.”

Trump proposes cutting the State Department budget by nearly 29 percent.  It could use a good haircut:.

  • The State Department’s OIG found abuseof the department’s travel program, with several hundred thousand dollars of unauthorized or improper charges on department travel cards in FY 2013-2014..
  • OIG reports also reveal that lack of grant monitoring by grant officers or grant offer representatives resulted in grant funds being misspent.  One auditin 2015 found $7 million in misspent grant funds simply due to lack of oversight.
  • Under former Secretary of State Hilary Clinton, the department wastedbillions of dollars, including $600 million in failed projects in Iraq and Afghanistan, $5.4 million on crystal stemware and $6 billion that went “missing” during her tenure.

These are just a few of many examples in just two government entities.  I could probably spend the next year reading OIG reports from every agency and department, detailing example after example of improper and misused grants, no-bid contracts, employee benefit abuses, missing funds and the like.

What about Trump’s cutting programs that help the poor?  There has been a lot of panic today about cuts to Meals on Wheels.  MOW is a non-profit that was originally started by a community of faith-based organizations.  While it does receive some government funding in communities through the Housing and Urban Development’s Community Development Block Grant program, it is not a government entity. In fact, local Meals on Wheels programs existed 20 years prior to the CDBG program and are primarily supported by individual and corporate donations.  Unfortunately, CDBG funds are known for being misappropriated, not to Meals on Wheels per se, but to community redevelopment and housing renovation and construction programs.  If citizens are serious about caring for the poor, they would work to prevent the numerous abuses and misuses of funds as documented in San DiegoBayonne and Union City, New Jersey, and lots of others.  Federal funding of local programs breeds corruption, mismanagement and misuse of funds.

And finally, while Trump proposes a major boost in defense spending, they are not immune to billions of dollars in fraud, waste and abuse as evidenced by their list of audit reports here.

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Consumer Driven Health Care

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