Medicaid is one of the largest expenses in Missouri’s budget. In fiscal year 2008, Medicaid spending in Missouri totaled more than $7.09 billion. The federal government pays for the lion’s share of that, but Missouri taxpayers were still on the hook for $2.66 billion, or just over 12.5 percent of the state’s total $21.2 billion budget. As Peter Suderman points out in a new article for Reason, Medicaid has gone from an initial inflation-adjusted price tag of $9 billion in 1965 to more than half a trillion dollars just 45 years later. Moreover, those costs are only likely to rise during the coming years:

Just yesterday, the Senate voted to put $16 billion toward extending a temporary boost in Medicaid funding contained in the stimulus; the House is expected to follow sometime next week. Meanwhile, the Obama administration’s signature achievement—the new health care law—relies on an expansion of Medicaid for fully half of its projected increase in insurance coverage. According to the Congressional Budget Office, thanks to the Patient Protection and Affordable Care Act (PPACA), 16 million new individuals are projected to enroll in Medicaid by the end of the decade, and many experts believe that those estimates are low.

To add injury to insult, the health care that people get through Medicaid appears to be pretty bad:

Numerous studies show that, on an array of specific maladies, Medicaid’s health outcomes are dismal—and in some cases worse or no better than the outcomes for individuals who lack health insurance entirely. A University of Pennsylvania study, for example, reported that colon cancer patients in Medicaid have a 2.8 percent mortality rate, compared with 2.2 percent for the uninsured. A study of Florida’s Medicaid patients found they were more likely to have late-stages of prostate cancer, breast cancer, and melanoma at diagnosis than the uninsured.

It’s also worth noting that poor Americans received medical care before the advent of Medicaid. In his history of 1960s liberalism, The Unraveling of America, Rice University historian Allen J. Matusow wrote that poor patients were typically treated by charitable doctors for free. Matusow concluded that “[a]side from middle-class old persons protected from the financial ravages of long illness, the clearest beneficiaries of Medicare-Medicaid were doctors, who, according to one estimate, enjoyed an average income gain of $3,900 in 1968 as a result of these programs.” I don’t know how the medical treatment that poor patients received before the passage of Medicaid compared to that received by the middle class, but it’s historically inaccurate to argue that the poor would not have health care absent a government program.

Still, given that Medicaid is unlikely to be repealed anytime soon, what is the best solution to its spiraling costs and poor service? Suderman argues that it should become a temporary safety net instead of a permanent entitlement. Unfortunately, most politicians seem determined to keep expanding the program. If continued indefinitely, that will lead to both low-quality health care for all and fiscal catastrophe.

Yesterday’s primary election featured a statewide vote on Proposition C, otherwise known as the Health Care Freedom Act. The bill originated as a proposed amendment to the Missouri Constitution, but when it became clear that the bill could not be brought to a vote in the Senate, its proponents reached a compromise that would allow citizens to vote on it as a statute. The new statute is unlikely to have much legal effect, but it was touted as a way for Missourians to concretely express their opinions about the individual health insurance mandate that serves as the cornerstone for the federal health care reform law adopted by Congress earlier this year.

The Health Care Freedom Act passed with more than 71 percent of the vote, but this alone does not truly tell the story. Primary elections have a different dynamic than general elections, with lower turnouts that can be dominated by one party or another; a measure passing with 71 percent of the vote might not be surprising if, say, the party most likely to favor that measure had far more supporters going to the polls. And, in fact, about 64 percent of those who voted yesterday chose Republican ballots, while only 35 percent chose Democratic ballots. The Health Care Freedom Act was sponsored by and primarily driven by Republicans, and its target was a provision in a bill passed by a Democratic Congress and a Democratic President — so, given the turnout, perhaps the landslide victory for Prop C was just to be expected.

Not so fast.

Looking more closely at the data, it appears that a significant percentage of Democrats also voted in favor of Prop C, presumably indicating dissatisfaction with the individual health insurance mandate. How can we know? Just compare the number of Democratic ballots cast in the race for U.S. Senate (315,787) to the number of votes cast against Prop C (271,102). That means that even if we assume that every person using a Republican, Libertarian, or Constitution Party ballot voted in favor of the Proposition (an unlikely prospect), more than 40,000 people using Democratic ballots also supported the measure. In St. Louis city, at least 29 percent of those casting Democratic ballots voted in favor of Prop C (26,696 Democratic ballots; 18,989 votes against Prop C). In Kansas City, at least 20 percent of those casting Democratic ballots voted in favor of Prop C (20,534 Democratic ballots; 16,383 votes against Prop C). When one considers that it is likely that at least a small percentage of Republican, Libertarian, and Constitution Party voters voted against Prop C, that means that anywhere from 25 percent to 40 percent of Democrat voters statewide probably supported the measure.

There are limits to what yesterday’s vote can tell us. For example, are Prop C’s supporters opposed to all parts of the federal health care law, or just the individual mandate? At a minimum, though, it does seem remarkably clear that Missouri voters have demonstrated a broad and bipartisan opposition to the idea that Congress should force people to purchase health insurance.

Quick answer: of course not. But let’s try to move beyond the anger many of us likely feel when reading this story in the Kansas City Star, and instead discuss the question. To sum up quickly, the Missouri Department of Social Services removed a newborn from her parents — both of whom are blind — two days after her birth. Yesterday, after 57 days in state care, the state placed the baby back with her parents.

Did the state make the right decision to return the baby in the end? (I certainly think so. I’d be interested to hear from anyone who disagrees.) Should the state have taken the baby away in the first place? (I don’t think so, although some might think the question of the baby’s safety required some type of action.) Should the state have the power even to consider doing what it did in the first place? In other words, should the state have the power to take a child away because of the fear of potential harm (let’s assume it is a legitimate fear), but absent any actual harm?

I think the third question gets tougher. That is not to say I agree with anything the state did here; I am merely posing the question. Should the state have any power whatsoever to remove a child from its parents because of the potential of harm, but before any real harm occurs? The problem here is that we can all come up with hypothetical situations that would probably lead to an answer of “yes” (i.e., the parents are meth addicts), but as soon as you say “yes” you are granting the state the right to make judgment calls. Inevitably, they will at some point use that judgment improperly, just like they did in this example. Let’s discuss this in the comments.

I have a few points I want to make — and I write all of this as a fairly new parent, myself. I think this statement by the mother is one of the most honest statements I’ve read in a while:

“I needed help as a new parent, but not as a blind parent,” Johnson said.

Being a new parent is tough. It was certainly tough for me, and I am about as perfect a physical specimen as you will ever lay eyes on. I can’t fathom being a parent in the situation these parents are in, but I feel certain that the sense a parent has for the well-being of their children will trump the issues those children may face. Practically speaking, I would bet that a home designed for the blind would be just as well baby-proofed as anywhere. If other parts of their lives are a little trickier than they are for the sighted, those are the challenges of life. For example, letting a two-year old Mikaela run around at the park will be hard for parents who can’t see the child. Do they use one of those child leashes? Only go to parks with fully enclosed fencing, like DeMun park in Clayton? Take family or friends along with them?

I don’t know the answers to those questions. I do believe that the family’s love will overcome all these obstacles, and I think the involvement of the state here has been an outrage.

While running errands last week, I was witness to an interesting phenomenon twice over. First, I passed a Walgreens that used yard placards to advertise $35 camp and sports physicals at their in-store clinics. Amazing! How rarely it is that one sees medical services competitively advertised with the true price right up front. Plus, it looks like customers can walk right in without insurance and without appointments, much like going to a restaurant and paying for a meal.

On the topic of food, my next stop along my journey was to grab a bite to eat at Bread Co. While scanning the menu on the wall, I noticed something I hadn’t ever seen before in Missouri — the calorie counts of all the food posted right next to the offerings. Amazing again! Free information at my disposal to make a decision about my health.

Why get excited over something so mundane? For one, there was a free exchange of useful information. The price system — much like the nutritional information system — is an amazing way of communicating information quickly and accurately. Second, in both instances the information was freely provided. Missouri restaurants, unlike some in New York City, are not required by law to include caloric information on their menus. But businesses here are still free to post that information as upfront as they’d like.

Best of all, businesses that choose to be more open with their information freely elect to bear the costs of collecting that information. The burden is usually on the customer to sort out the nutritional value of her food, but in some cases it may be in a restaurant’s business interest to display information more explicitly, or even to be more charitable. The result is a free and fair exchange of information or money that leaves both parties better off.

Ultimately, the most fascinating part of my journey was the fact that the businesses and I were free to choose. The businesses chose to offer certain services and bear those costs in the hope of attracting or retaining more customers. For my part, I could have purchased a sports physical if I wanted, but I didn’t need to. I could have purchased the healthiest sandwich on the menu, or the least healthy. I could have ignored the caloric content completely, and ordered dessert for dinner. No one got to tell me what to order, and I could have left the restaurant altogether if I had wanted. Information freely available at my disposal helped shape my decisions.

As usual, the more freedom and information we have as a society, the better choices we can make for ourselves and those we care about. And that’s always something to get excited about.

Yesterday morning, Missouri’s lieutenant governor filed suit against the recently passed federal health care reform. It’s difficult to know exactly what to make of certain aspects of this lawsuit, because it assumes the manner in which the federal health care law will function — and it is not clear that the lawsuit’s assumptions are correct. Even if they are correct, however, there are a few issues that may prevent this lawsuit from proceeding. The first is the question of standing. Before a court will consider and rule on a legal issue, plaintiffs must establish that there is a current case or controversy between themselves and any defendants. Where the government is the defendant, this usually means that the government must have taken some act that has caused a harm or detriment to the person filing the lawsuit. It is not usually sufficient simply for a law to be on the books; courts usually (although not always) require that there must have been some implementation of the law before they will address its validity. Also, it is important to remember that plaintiffs cannot generally bring claims on behalf of others.

This lawsuit has eight counts. Several of these assert rights properly belonging to the state of Missouri. The lieutenant governor suggests that because a state statute gives his office the responsibility to be an advocate for the state’s elderly citizens, he has authority to seek relief on behalf of the state government. Similarly, the lawsuit claims that the citizen plaintiffs, as taxpayers, have a right to raise these claims on behalf of the state government. It is possible that courts have previously found citizen taxpayers to have standing to sue on behalf of their state government, but I cannot think of any examples and I do think it unlikely. Thus, I don’t think a court is likely to agree to consider counts one, three, and four. And, even if the court did address them, I question the viability of several of the lawsuit’s assertions in these counts. It may be correct that the federal government has no proper authority to require the state government to adopt certain programs (count one), no authority to compel the state government to make a payment to the federal Department of the Treasury (count three), and no authority to force the state government to increase state taxes in violation of the Missouri Constitution (count four) — but it is not particularly clear that the federal health care law would actually do any of these things. As I have pointed out, the lawsuit assumes that the law will be implemented in a particular way, but we cannot be sure that its assumptions are accurate. This has an enormous bearing on the validity of these claims.

Count two deals with the compensation provided to state officials, so it is at least arguable that the lieutenant governor could have standing to assert the claims of that count. The substance of the claim, however, is dubious. It seems highly unlikely that the federal government is not permitted to impose certain limitations on how the state of Missouri is permitted to compensate its employees. For example, would the state argue that it is not required to pay minimum wage or to comply with anti-discrimination laws? The principles of state sovereignty expressed in count two are, I believe, well made, but they do not necessarily demand a conclusion that the targeted provision of the federal health care law is unconstitutional.

Counts five and six address the individual insurance mandate, which does not even go into effect until 2014. I think the legal arguments in these counts are well-founded, but the claims are premature and will continue to be so until the mandate is actually implemented.

Count seven may actually have some legs. It addresses the provision of special treatment for citizens of certain states, which was incorporated into the health care law in order to secure the votes of certain congressional representatives. The count points out that these exemptions, or “grandfather” provisions, require that the law be applied differently to similarly situated citizens based on nothing other than their geography. That’s a powerful claim, assuming that the law will be implemented in the way that the lawsuit envisions. Those aspects of the statute go into force on Jan. 1, 2011, so it’s possible that the court will be willing to address them.

Count eight attacks the infamous “panels” that are expected to be established to evaluate the appropriate levels of treatment for various health care situations. The lawsuit assumes that these panels will have the power to forbid doctors to provide services to citizens willing to pay for them. If that assumption is correct, this count may have life — if and when the panels are ever constituted and actually issue the anticipated prohibitions. I do not, however, think that a court is likely to assess this claim until those things have taken place.

So, taken as a whole, I think it likely that the court will ultimately dismiss at least half of the claims raised in this lawsuit (and probably three quarters of them) as lacking either standing or ripeness. It is possible that the court will address the merits of counts two and seven. It is difficult to predict how the court will come out on count two, although I think it unlikely that the court will find a constitutional violation. If, however, the federal statute implements the provision targeted by count seven in the manner that the lawsuit anticipates, I think there is a very strong chance that it will be struck down as unconstitutional.

Phase one of the federal health care reform starts today! Those who indulge in a certain activity that could increase the likelihood of cancer will feel the effects on their wallet: tanning salons are now subject to a 10-percent tax that is meant to fund further insurance coverage expansion.

This can be seen as a form of Pigovian tax, which raises the costs of certain activities in order to correct for social costs or negative externalities that are not covered in the market price. In this case though, the externalities of tanning beds are internalized: If I choose to tan, I accept the increased risk that I may get skin cancer. If that were to happen, my insurance company and I would have to pay for the cost of treatment. (And it could be that my insurance company chooses to raise my premium if I indulge in risky behaviors, which is their prerogative.) One could argue that a hypothetical person with tanning bed–induced skin cancer could end up costing others in medical bills, but if that were the issue, the problem would lie in the structure of health care provision, not natural externalities.

What’s next? Should we impose more taxes on roller blades, lest I skin my knee or break my ankle? Or junk food? If we want to really get to the root of what causes skin cancer, shouldn’t we be placing the blame where much of it belongs: the sun? It wouldn’t be the first time someone proposed legislation against the sun.

According to a study cited in an article in the Wichita Eagle, obesity rates are increasing in Missouri, and faster than the national average.

The author of the study says that the rising rate is largely attributable to the fact that snack foods and soda are priced lower than healthier foods. He proposes that:

[...] there is more that federal, state and local governments can do to reduce obesity, including taxing sugary drinks, providing incentives to grocery stores that locate in underserved areas and requiring restaurants to clearly label nutritional information on their menus.

Neither the article nor the author of the study discusses the fact that the federal government heavily subsidizes the production of corn, which significantly reduces the market price of starchy and sugary foods to consumers.

Instead of subsidizing the production of a good, and then taxing the consumption of the ensuing unhealthy products, it would be more efficient for the federal government to remove the subsidies entirely. This would cause the price of sugary and starchy foods to increase relative to other foods. Consumers would face a greater natural incentive to eat healthier substitutes like fruits and vegetables because they would be relatively less expensive. This would benefit low-income people in particular, because they pay a greater percentage of their income for food, so eliminating corn subsidies could help to reduce the difference in the rates of obesity across income levels.

As contributors to this blog have argued previously, an individual’s waistline is the responsibility of the individual, not of the government.

The Commonwealth Fund published a study comparing the health care system in America to the systems of six other developed nations, and found it lacking in a few of the categories. Many Americans believe that the health care system needs some sort of reform, although they conflict on what type is necessary. While there is definitely room for improvement within the U.S. system, I take issue with some of the Commonwealth Fund’s analysis and conclusions that call for a more centralized, universal system.

First, some of the data relies on physician and patient surveys. Individuals in different countries have different expectations for their health care systems, an important factor that the study’s authors admit might have affected the ratings:

Patients’ and physicians’ assessments might be affected by their experiences and expectations, which could differ by country and culture.

One of the categories I find most objectionable is “long, healthy, and productive lives,” which has a rather ambiguous meaning. The authors used three indicators to determine what constituted a “long, healthy and productive life.” (Table data excerpted from the study):

Exhibit 8. Long, Healthy, and Productive Lives Measures

These three indicators do not fully capture “productive” or “healthy” lives. There are more relevant measures of productivity and quality of life, such as statistics about morbidity, the amount of time spent ill, or disability-adjusted life years (DALYs), which account for degree of sickness as well as length of life. These are sometimes difficult to calculate, but they are standard measures used by the World Health Organization (WHO) and far more relevant for a category about “healthy” and “productive” lives.

The indicators used do not capture the fact that someone waiting 18.3 weeks for surgery in Canada may also be losing four months of work productivity, as well as spending a long time with an impaired quality of life. The United States ranked first in wait times for specialists and nonemergency surgeries. When one includes those factors, a different story emerges from the data.

For the indicator “Health life expectancy at age 60″ the United States ranks sixth, but a closer look at the raw percentages shows a very small range from first to last; whether these differences are even statistically significant was not addressed in the study. Nor does the category capture that Americans work longer — both in their work week and in their lifespan — than the other countries listed, which could explain the slight difference in the raw percentages. American work ethic is a cultural issue, not an implication of the health care system.

Also, infant mortality is a contentious indicator for the success of a health care system. Different countries use different measurements to calculate the statistic. The United States strictly follows WHO guidelines by counting all babies that have shown any sign of life, whereas Germany, for instance, only counts babies that weigh at least one pound at birth. Other countries do not count births earlier than 26 weeks. This disparity in measures of reporting artificially skews the rates, without factoring in cultural differences, like teen births, that also contribute to higher infant mortality.

In developed countries, a large portion of the increase in life expectancy is not attributable to the health care system. During the past century, the average life expectancy in the United States has increased by 30 years; modern medicine can only account for five of those years, while public health measures account for the other 25. Attributing small changes in mortality to medical care is very tricky. Lifestyles can affect health outcomes as much — if not more — than health care. The obesity rates in the United States are much higher than the other countries listed. Holding health care systems equal, that one factor would lead the United States to have lower health outcomes. Again, this is a cultural issue, and not an indication that a universal system would improve U.S. results.

A conclusion some may reach after reading the study is that universal health care is the solution to perceived disparity; this seems to be the conclusion the authors hoped to make. In fact, the study actually suggests that the new federal health care legislation will improve U.S. outcomes:

Newly enacted health reform legislation in the U.S. will start to address these problems by extending coverage to those without and helping to close gaps in coverage—leading to improved disease management, care coordination, and better outcomes over time.

Incentives need to be realigned, but that has more to do with the disconnect between patient and physician — the health care wedge, explained in the Show-Me Institute study “Prognosis for National Health Insurance: A Missouri Perspective.”

The Commonwealth Fund study admits that none of the other nations considered have “ideal” health care systems, and makes some questionable comparisons in order to “prove” that universal health care is the best way to solve problems in health care. Show-Me Institute staff and scholars have discussed better solutions for health care reform in blog entries, op-eds, and policy studies.

The Commonwealth Fund study notes that the largest problem in the U.S. system is affordability of health care; the study thus concludes that universal health care is the solution, rather than making health care more affordable. The Congressional Budget Office has calculated that the recent legislation, lauded in this study, will actually increase the cost of health care. The Commonwealth Fund study suggests a solution that will bring the exact opposite of the problem it anticipated: Health care will become too expensive for some people.

Just because a few countries are getting (questionably) better results by some carefully selected measures under universal health care systems does not negate the fact that market-based solutions are a better solution for Missouri and the whole United States.

Yesterday, Martha King made a liberty-oriented argument against cigarette taxation, noting that cigarette taxes are imposed by a majority (nonsmokers) on a minority (smokers). A study in The Public Opinion Quarterly supports her conclusion; it found that where cigarette taxation is involved, individuals are self-interested. Nonsmokers favored cigarette taxes far more than smokers did. The majority choose to impose a tax on the minority, in many cases using moral or economic arguments that the use of cigarettes leads to poor outcomes.

The Daily RFT blog picked up on her post, but didn’t seemed particularly swayed by an argument for liberty. I had a conversation yesterday morning with my coworker Abhi Sivasailam, who suggested an efficiency argument against taxation, and pointed me to a National Bureau of Economic Research working paper titled “Cigarette Taxation and the Social Consequences of Smoking.” An argument that many people make in their attempts to justify cigarette taxes is that such a tax helps to internalize the additional costs of smokers — but this study concludes that the societal cost is already internalized.

From the study’s abstract:

Detailed calculations of the financial externalities of smoking indicate that the financial savings from premature mortality in terms of lower nursing home costs and retirement pensions exceed the higher medical care and life insurance costs generated. The costs of environmental tobacco smoke are highly uncertain, but of potentially substantial magnitude. Even with recognition of these costs, current cigarette taxes exceed the magnitude of the estimated net externalities.

So, if the costs of smoking are already largely internalized, imposing additional taxes on cigarettes is inefficient. It’s also worth pointing out that cigarette taxes are regressive, and any argument that holds the state should appropriate money from smokers to pay for other programs places an undue burden on a vulnerable group.

Is it horrible that people die from smoking cigarettes? Yes. Is it horrible that people die in automobile accidents? Yes, but that doesn’t constitute a rationale for taxing cars out of existence, or cupcakes, or the many other things that people use and enjoy that can also contribute to future poor health. If free, consenting adults choose to smoke, despite the known risks, it is their prerogative.

In the recent public discussion of the autism bill and health insurance mandates, a recurring question has emerged: can a particular mandate be worth the costs — or, at least, be more worthy than most? If we follow that logic, though, where do we draw the line?

As of 2009, Missouri had 41 mandates for health insurance. Considered singly, no individual mandate had a large impact on premium costs, but they each had a marginal impact. Every incremental increase in the cost of health insurance premiums leads to the possibility that some unknown number of individuals and businesses are no longer able to afford their previous coverage.

Here is a look at mandates in Missouri (data compiled from the Council for Affordable Health Insurance):

As we’ve discussed before here at Show-Me Daily, injecting competition into the insurance market is really the only long-term solution that will both increase coverage and lower health care costs. Sarah Brodsky has also suggested tuition tax credits for autistic children as another alternative to insurance mandates.

Regardless of how one looks at the issue, mandates do not serve as a solution. The list provided by CAHI contained 130 different mandates throughout all of the states and Washington, D.C. Health insurance would be prohibitively expensive for far more people if every policy had to cover all 130 items, and there will still be many other conditions or diseases that are not covered. Does every 20-year-old want insurance against Alzheimer’s disease? Does every 60-year-old want insurance against autism?

With more choice in the insurance market, people can better choose for which illnesses or conditions they wish to be insured. Eliminating the way in which insurance is tied to employment and encouraging health savings accounts would allow individuals to purchase portable, cost-effective policies, saving for foreseeable health-related expenses while hedging against unknown future risk.

The Fulton Sun (link via John Combest) ran an article about a campaign to improve health literacy in Missouri, aiming to increase individuals’ understanding and ability to use health care resources. Health Literacy Missouri is working on this effort in conjunction with the Missouri Foundation for Health:

The goal, said Arthur J. Culbert, president and CEO of Health Literacy Missouri, is that “information needed to make healthy decisions is available to all, and is easy to understand.”

But, he told a Thursday afternoon news conference, the new national plan is based on an understanding that “nearly 9 out of 10 adults have difficulty using the everyday health information that is routinely available in our health care facilities, retail outlets, media and communities.”

The low health literacy in Missouri is a result of two systemic breakdowns: one in education, and one in health care.

In education:

“[M]ost medical information is written at a 12th-grade level or higher,” Culbert explained, “and the average reading level in the United States is somewhere around sixth to seventh grade.”

The low reading level in America is in part a result of students remaining in failing schools, which is something that the school choice and educational reform movements are hoping to remedy. Beyond improving health literacy, improving functional literacy will improve a person’s job prospects and quality of life.

Even if one’s reading ability is sufficiently developed, understanding the jargon and complex structures of the health care system still confuses most people. The bureaucratic muddle that is our health care system is a large part of the reason that health literacy is difficult for many. That complexity is only increased by the wide array of types and levels of governmental involvement in the health care system.

Improving education and reducing the complexities in the health care system are vital to any efforts to truly improve health literacy in the United States. Health literacy is important, but focusing only on the symptoms of a systemic problem is not a long-term solution.

Because I’m a masochist, I have actually read through some of the comments to this op-ed on mandating autism insurance by the Show-Me Institute’s own Caitlin Hartsell. Unsurprisingly, they are mostly unfavorable. Most of the comments don’t attack Hartsell’s reasoning or even her conclusions, but seem to assume that because there is a problem (children with autism need treatment) that government action (a mandate forcing health insurance to cover autism treatments) will solve the problem and not cause any negative unintended consequences. These are just further examples of the government-as-magic school of thought. That’s certainly distressing, but I see it so often that I’ve come to take it for granted.

What I do find shocking in the comments is that some people don’t seem to be even remotely familiar with how insurance is supposed to work. The best example comes from commenter bogie90:

And do you buy autism insurance before your child is born just in case they have autism? Who would do that? And the insurance companies aren’t going to cover after the fact, remember pre-existing conditions?

Yes, of course you buy it before the child is born in case they have autism. That’s what insurance is for: to protect you against tragic but unlikely outcomes. You buy fire insurance for your house just in case you have a fire. However, you can’t insure your house against fire once it has the pre-existing condition of being on fire. At that point, insurance is just dollar trading to repair the damage from the fire. This might be one of the big problems with the debate over health care: people do not actually know what health insurance is.

The Christian County Health Department just did what regulators are best at: protecting us from ourselves because we are all stupid and can’t make our own decisions. The Springfield News-Leader reports that Christian County has banned the sale of raw milk within the county. We here at the Show-Me Institute have written about raw milk before. According to the Springfield News-Leader, the county’s health board (not the elected county board of commissioners, just the appointed health board) went even further than state law required (not that I agree with the state law in the first place) and issued a wide-ranging ban of the sale of raw milk at markets, even though it is perfectly legal to consume raw milk if you do it at your own house.

In my opinion, the only law needed is that the milk in question must be clearly labeled as unprocessed, or “raw.” When that information is available, adults can make their own choices.

The News-Leader article is very good, and contains some great quotes. And by “great,” I mean “infuriating.” Check out the nanny state in action:

The board said allowing unregulated dairy farmers to sell to the public was not in the interest of the public they are charged to protect. Without regulations or testing, no one would know if the raw milk was safe.

Check out the local health department version of “we had to destroy the village in order to save it”:

Though consumption of raw milk is legal, board member Aaron Grier said the ban could help people get more informed about the farm where they’re buying it.

We have to ban it so we can we be sure you want it! And here is where they went even further than state law in making certain that people in Christian County don’t get to make decisions that affect themselves:

However, the board voted to ban all raw milk sales and distribution, including Grade A permitted raw milk, which can be sold to end-consumers, under state law.

I presume that the elected county officials have the capacity to overrule the appointed board. I hope that the citizens of Christian County bring these concerns to the elected board, and I wish them luck in changing this absurd decision.

My op-ed on the new autism mandate ran in the Missouri Record this morning, and the blogosphere has already begun to respond! Perhaps I did not articulate myself clearly enough, because this author’s post reflects some misunderstandings of my argument that I would like to clear up:

The problem with free market, anti-regulation fundamentalists is that their arguments lead to despicable results (witness Rand Paul’s opposition to integrated lunch counters). A prime example shows up on the Missouri Record site, where grad student Caitlin Hartsell argues that if we increase costs to insurance companies by making them pay for autism spectrum disorders, those insurers might increase rates. (Characteristic of free-market extremists, she doesn’t provide numbers, or consider the possibility that the costs could be covered by reducing out-of-control executive compensation packages).

If you have a strong stomach or sense of humor, go read her obsequious offering to her Show-Me Institute bosses, and substitute any malady whatsoever as the subject. Try breast cancer or broken limbs, and you can have an argument in favor of freeing our health insurance companies from the burden of having to pay for, umm, health claims.

Where to begin? I never argued that insurance companies shouldn’t pay for claims; I argued that creating mandates is not the solution.

Competition needs to be increased in the insurance market, thus giving insurance companies a strong incentive to cater to people by providing coverage for things like autism therapy. A better solution than a mandate would be to increase competition by breaking the tie between someone’s employment and their insurance, by giving individuals the same tax breaks for insurance policy purchases that employers receive. This would give people more stability, because they could carry their insurance policies throughout their lives, and through uncertain economic times. If the tax break were offered to individuals rather than just employers, it would also reduce the incentive for them to offer “Cadillac” health plans that inevitably trade a portion of employees’ monetary compensation for expansive coverage that doesn’t meet everyone’s needs or budget requirements.

Unfortunately, the free-market argument is far too often misunderstood, because it focuses on the “unseen” as opposed to the very visible “seen” of children with autism. The author of that blog entry and I may very well hope for the same outcomes, but we disagree on the best way to achieve them. I want very much for children with autism to receive the necessary therapy. I also want children with any number of diseases to obtain proper care and coverage. By subjecting the market to competitive forces, people would have an increased ability to choose health insurance plans that fit their unique needs.

Statistics about the increase are available, but they are disparate, and determining the relevant figures depends on which side of the debate you ask. It will also depend on how regulators choose to interpret the provisions. But when costs increase, there will be people at the margin who are affected. Those most affected are the people whose illnesses or conditions aren’t covered by a mandate — their insurance costs are higher, but they do not receive any benefit.

The governor will be jetting around Missouri over the coming week for ceremonial signings of H.B. 1311, the Autism Spectrum Disorder Coverage Bill. On Thursday, he will go to Joplin, Springfield, and Columbia. On Friday, he’ll be in St. Louis and Kansas City. On Tuesday, he’ll be in Cape Girardeau. Why one bill requires the governor to be present at six signing ceremonies across the state leads to questions about fiscal responsibility. One would hope that this expense and hoopla isn’t devoted to each of the more than 100 bills delivered to the governor for a signature.

Beyond travel expenses, though, the signing of this bill will be costly for Missouri. I’ve written before about why I think an autism mandate is bad policy for Missouri. The bill may be a huge gain for the 300 to 350 families that will be helped by the mandate, but the rest of Missouri will pay for it in higher insurance costs and foregone jobs.

The Riverfront Times gets it exactly right as to whom the recently passed health care bill will help in the short-term: the modern-day 20-something slacker. The recently passed bill contains many offensive and horrible parts, but the requirement that children be covered under their parents’ policies until they are 27 is especially so.

This one rule encompasses the worst of all worlds: an overbearing nanny state, the belief that the government has the right to dictate such rules to families and private businesses, and legislation that now makes it even easier for young people out of college to further delay adulthood.

Show-Me Institute scholars and staffers have written many blog entries, op-eds, and studies dealing with health savings accounts (HSAs). Accompanied with a high-deductible plan, they allow an individual to place money to be spent on health care costs into an account, tax-free. These monies are used to pay for basic procedures under the deductible limit, and encourage customers to find the best prices and shop around.

These plans have been celebrated as a market solution that helps contain health care costs, a mechanism that the new federal health care legislation lacks. Unfortunately — and, perhaps, ironically — HSAs may no longer be an option under the new legislation. Katherine Nix of the Heritage Foundation’s blog The Foundry writes:

Unfortunately, Obamacare threatens to render HSA/HDHP plans a thing of the past. It’s a regulatory thing. It all depends on how the Department of Health and Human Services decides to calculate the actuarial value of HDHPs. According to Roy Ramthun of HSA Consulting, if HHS opts not to “count” contributions to HSAs as part of the actuarial value, then “HDHPs, many of which have actuarial values below 60 percent (or whatever the final standard becomes) based on the insurance coverage alone, could no longer be sold.”

HSAs bring market forces to the health care industry; they minimize the health care wedge between health care consumers and the costs of their care by removing the veil between consumer and price. It would be unfortunate for the nation — and for Missourians, who have enjoyed the opportunity to purchase HSAs since 2007 — if they become no longer a viable insurance option.

A recent article in the Columbia Missourian highlights some of the steps being taken in Missouri to combat childhood obesity. Among the initiatives mentioned are the Walking School Bus and Farm to School programs:

More than 400 students from 10 Columbia public elementary schools participate in this Walking School Bus program, sponsored by the PedNet Coalition. A trained adult walks a set route each morning, picking up kids along the way and guiding them to school.

In addition to cutting costs for buses facing rising fuel expenses, the Walking School Bus is designed to increase physical activity for children in order to combat the country’s growing childhood obesity epidemic.

The difference between the two programs is that the Walking School Bus is grounded in the volunteerism of adults willing to walk with children to school, with the end of incentivizing good habit formation, whereas Farm to School is a government program that encourages the use of local food in school lunches. There are a couple of problems with the latter. As Sarah Brodsky and Caitlin Hartsell have pointed out, it’s incorrect to conflate “local food” with “healthy food”; food produced locally may not always be healthy, and food that is healthy may be imported from outside a given region. Mandating that school food be locally procured is also costly, because price-based competition from a large portion of the potential market for food is left unconsidered, and the increased demand for local food contributes to a rise in its prices.

It can also be a costly mandate for local farmers, who must cope with changes in the types of crops that they grow. A Columbia school district official admitted:

“We’re essentially asking farmers to start to grow what we want them to grow. And that’s a big risk for them.”

It is indeed a risk for Missouri farmers, who must diversify their crops to meet a new form of demand. Modern farmers maintain a delicate balancing act of running up huge debts in acquiring machinery that is geared specifically for the crops they have elected to raise. Mandating that schools provide local food presents an opportunity for local farmers, but also places a burden on them to raise a diversity of crops year-round — for many, a costly and impractical endeavor. Missouri farmers will be taking more than a “big risk” here and now; this involves their whole financial life plans.

Tackling the difficult issue of childhood obesity requires daily diligence in habit formation, because parents ultimately control the health of their children. One or more healthy meals served at school every day can be negated by a pantry full of junk food at home. This is not to say that schools shouldn’t care about serving healthy food — indeed, school lunch programs that focused on meeting nutritional guidelines, whether or not the food is locally procured, would better balance costs with student health.

Similarly, a mandated exercise class during the school day doesn’t affect the inactivity of kids who stay indoors and play video games all day on the weekends and during the summer. Yet initiatives like the Walking School Bus program directly incentivize the most important players on this issue — the parents and children themselves. Children are habituated toward associating activity with involvement with their peers, and parents are given an easy, safe, and inexpensive way of getting their kids to school that may benefit the community (e.g., through reduced traffic congestion near schools) at the same time. Yet again, volunteerism creates a win-win for everyone.

Within the health care debate that has taken place during the past year, “death panels” and health care rationing were both pegged by some as distinct possibilities and dismissed by others as ridiculous fantasies. Yesterday, Michael Tanner at the CATO Institute wrote that the concept of death panels may come to fruition, considering that the new director of Medicare and Medicaid is a fan of the United Kingdom’s National Institute for Clinical Excellence (NICE), a government agency that has been accused of rationing health care.

Like all things, health care is a finite resource. As such, it is always rationed in some way. The important issue to determine is who — or what — is doing the rationing, and what criteria is used. After all, people ration in their daily lives when they choose how much of their paychecks to spend on groceries, clothes, or movie tickets. When individuals ration, they decide between individual trade-offs. The difference is not the mechanism, but the actor.

The price system is arguably the most efficient method to allocate resources. As Nobel laureate economist F.A. Hayek articulated in “The Use of Knowledge in Society,” the price system contains information for both the seller and buyer. With health care, however, true costs are largely veiled by what can be termed a “health care wedge” — a separation of consumers from knowledge of costs. A patient may face a decision of whether to seek treatment in the form of high-cost, high-intensity care or low-cost, low-intensity care (or no care, as the case may be) but lacks real price information to make an informed decision about whether the expected outcome will be worth the cost. This lack of information makes the high-cost, high-intensity care more appealing in situations where it might not otherwise be chosen. Because of the skewed incentive structure that this creates in the current health insurance market, costs will continue to rise. This leads some to believe that it is necessary for the government to establish new ways of rationing care, which ignores the real problem: the separation of consumer and cost of treatment. By finding a way to mitigate that health care wedge, the decisions about when and why to ration can be returned to individuals and their physicians.

How can this be done? Nearly two decades ago, Show-Me Institute scholar Susan Feigenbaum suggested a different mechanism for health insurance: indemnity insurance. She likened the process to automobile insurance. When an illness is diagnosed, the insurance company would follow a process that is similar to when an automobile claim is made. The company would assess the medical issue and write a check for the probable cost. The customer would then be able to choose how to spend that money.

This system would create an incentive to shop around. Less intensive — and less costly — treatments become would more appealing, because thriftiness is rewarded. Some people would choose to use the entire amount for intensive health care. Others, especially those with terminal illnesses, might opt for minimal hospice or palliative care and set aside the remainder in a trust fund for a child or grandchild. Depending on how this type of plan were implemented, certain caveats could be included, like specifying a minimum level of required care, or precluding autonomy in making medical choices for those deemed too sick to make a sound decision. Those issues aside, indemnity insurance would place the decision in the hands of the individual.

The important thing is that this mechanism would introduce competition into one of the more expensive areas of health care, end-of-life care. Competition is necessary to bring down health care costs in the long term. Indemnity care is not the only possible solution, but it is one that must be considered, alongside other market-based solutions like health savings accounts. Missourians would benefit with an opportunity to choose from a variety of market-based health care options.

As many fans of the Show-Me Institute will already know, I have spent a lot of time during the past six months discussing the questionable constitutionality of Congress’ attempt to punish individual citizens who choose not to purchase government-approved health insurance policies. In fact, I’ll be discussing this issue tomorrow morning between 10:15 and 10:45 on Sarah Steelman’s radio show on KWTO 560-AM in Springfield. You can also listen in online.

Early in this year’s legislative session, members of the General Assembly asked me to offer testimony on the Health Care Freedom Act, which was proposed as a constitutional amendment that would recognize the fundamental right of citizens of Missouri to decide for themselves how they will pay for their health care, and that no government could rightfully interfere with that decision. In my testimony, I pointed out that if courts decided that nothing in the U.S. Constitution prevented the government from mandating the purchase of government-approved insurance policies, a constitutional amendment of the sort contemplated in the Health Care Freedom Act could offer a legal “Hail Mary” — a last line of defense that might prevent further congressional intrusion into citizens’ lives.

Despite overwhelming support in both the House and Senate, the Missouri General Assembly did not agree to let citizens vote on this constitutional amendment. Instead, the legislature placed the original bill’s language into House Bill 1764, which would allow voters an August referendum on adopting a new statute. Many of the legislators and citizen groups who had worked to pass the original bill are now hailing the passage of HB 1764, implying that if the people vote to adopt this statute, it will have the same effect as the proposed constitutional amendment might have. Unfortunately, this is simply not true. Missouri voters may well use this referendum as a political statement through which they can express their opinions about the federal health care reform law, but the text that might have been legally useful as a constitutional amendment will have zero legal effect as a statute.

The text that will be presented at the referendum states, in part: “No law or rule shall compel, directly or indirectly, any person, employer, or health care provider to participate in any health care system.” A court called upon to evaluate whether this provision would be effective against any federal enforcement of the health insurance mandate will first point out that because the language makes no reference to any particular government, it must be assumed to apply only to law- or rule-making subdivisions of the state of Missouri. Not only is it virtually unheard of (and generally futile) for a state statute to attempt to bind the federal government or one of its agencies, the plain text of the bill says nothing to suggest that is its purpose. A court looking at this provision as a statute will almost certainly end its analysis there.

However, even if the court infers that the General Assembly intended to prevent the enforcement of certain federal laws, the statute will fail. In order for the Health Care Freedom Act to have any hope of being effective, it would have to give citizens the basis to argue that health care freedom is a fundamental right beyond any government’s rightful authority to transgress. If the citizen could make that argument, there would be a very slight chance that the U.S. Supreme Court might consider such a fundamental right sufficient to prevent the government from punishing those who chose not to abide by the individual insurance mandate. A statute, however, is not the mechanism by with citizens establish fundamental rights or liberties — they put those in their constitutions, where they are insulated from repeal or avoidance by future legislation. Thus, even if HB 1764 had purported to establish a fundamental right or liberty, courts would have been unlikely to take them seriously. It just so happens that HB 1764 does not even make such an effort, further diminishing any legal usefulness it otherwise might have had.

To be clear, I do not mean to suggest that proponents of the Health Care Freedom Act are intentionally misleading people as to the likely effect of HB 1764. But Missouri’s citizens deserve to know that the bill and the upcoming referendum it authorizes can only be considered a political statement. Even if the people adopt this statute at the August referendum, their rights and liberties will be no more secure than if the bill had been defeated.

As the legislative session comes to a close this week, a number of bills have supporters who are eager to see them passed. Two of those bills, H.B. 1311 and H.B. 1341, would succeed in raising the cost of health insurance for all Missourians by requiring state-regulated private health insurance companies — those covering small- and medium-sized businesses — to cover up to $55,000 annually in screenings and therapy for children with autism spectrum disorders. I explained in a previous post why mandates raise the cost of health insurance for everyone, pricing some people out of the insurance market. As of this afternoon, these bills will be advancing to conference and will be subject to one final vote.

This morning, I received an email message from a group that supports the autism bill urging its supporters to contact the House speaker, who they believed had been preventing the bill from reaching conference for a final vote. The email mentions that the speaker’s family is involved with the Ozark Center for Autism in Joplin, and questions how he can support causes that help autism spectrum people, yet also oppose the bill.

There is a disconnect in that logic. Opposing the insurance mandate does not indicate a lack of caring about autistic children and their families. Instead, it may follow from a recognition that government mandates necessarily increase health insurance costs for everyone. This hurts the families and children who suffer from conditions that are not state-protected. It also hurts individuals who can no longer afford their insurance premiums because increased premium costs have priced some marginal number of them out of the market. Opposing the bill demonstrates an understanding that the proposed legislation has effects other than the immediately foreseeable subsidy for autistic children, but also the unseen effects for individuals who have not been granted the protection of a similar state mandate.

This example clearly demarcates the differing approaches taken by competing political ideologies. The Ozark Center for Autism is a private charity that specializes in providing the applied behavior analysis therapy that the mandate seeks to cover. Supporting this group is an active measure to help autism-spectrum children without creating a government mandate. Supporting the activities of a private charity does not increase the costs of health insurance for other individuals.

Government mandates, on the other hand, raise health care costs for the rest of the population — even when those mandates are targeted to disabilities or disorders that we particularly hope will be supported. It would be prohibitively expensive to mandate coverage of every potential health problem, but increased competition in health insurance markets would allow families to choose the coverage that best suits them. Individuals who feel strongly about helping those who are afflicted with a certain condition can donate to a private charity that provides services to assist those who can’t afford treatments on their own. Involving the government is not the only solution to such problems, nor the most effective one.

Illinois is voting tonight on whether to raise their cigarette tax by a full $1. If this passes — and I don’t care either way, as a non-smoker who doesn’t live in Illinois — there can be no doubt it will be good for tobacco tax collections in Missouri. Nobody can doubt that at least a small portion of Illinois residents will shift their tobacco purchases to Missouri and other nearby states, leading to more business and higher tax collections here, but without any increase in Missouri smokers’ costs.

I would guess that most Illinois residents who can easily purchase smokes or gas in Missouri — such as the many St. Clair and Madison County residents who work in downtown St. Louis — already do so. The current tax difference on cigarettes is large enough to distort economic decisions. If the Illinois legislature increases it by another $1, the marginal changes might not be as large as one would expect, but they will certainly exist, and to Missouri’s benefit.

As we are all aware, President Barack Obama signed the Patient Protection and Affordable Care Act on March 23 (P.L.111-148). It is far-reaching, and will influence many parts of our lives for many years. The concern of this report, however, is what it will do to you today. When examined from the perspective of a single individual, its biggest immediate effect will be the requirement that every U.S. citizen and legal resident have qualifying health care insurance coverage. The new law indicates that those without coverage will have to pay a penalty. This penalty will start to take effect in 2014, and be phased in over a two-year interval. By 2016, the penalty will be the greater of $695 per year per person, up to a maximum of three times that amount ($2,085) per year per family, or 2.5 percent of a family’s household income. That is, those with an income of $27,800 per year or more will be fined an amount equal to 2.5 percent of what they report as income to the Internal Revenue Service. In addition, starting in 2016 this penalty will be increased annually by a cost-of-living adjustment.

Interestingly, exemptions will be granted for some very specific cases. The most common ones are financial hardship, religious objections, and those without coverage for less than three months. The exact level of financial hardship is spelled out in the law quite succinctly; the only people who qualify are those with incomes below the tax filing threshold (in 2009, the threshold for taxpayers under age 65 was $9,350 for singles and $18,700 for couples).

The other side of the situation is that if you have employer-sponsored health care insurance, or pay for your own insurance, you can keep your current policy. However, the new law requires a higher minimal standard of benefits for all participants. As a result, it is expected that by 2016 all policies will cost 10 to 13 percent more than the expected future cost of a current policy extended to that year. Countering that expense will be a potential tax credit by which a family of four that has an income of less than $88,000 will receive tax credits to help pay insurance premiums and deductibles. At the same time, people at the other end of the economic spectrum will be given a new burden. Those families that report an income of more than $250,000 per year will have to pay more in the form of a Medicare payroll tax; their unearned income will be subject to an additional 3.8-percent tax.

As you know, in the past some of my colleagues advised individuals and small businesses to purchase health savings accounts (HSAs). The new law will have an immediate effect on people that took that advice. It will exclude a currently accepted practice, in which the costs of over-the-counter drugs not prescribed by a doctor were reimbursed on a tax-free basis. The law will increase the penalties for inappropriate distributions from HSAs, also; that is, for withdrawals that are not used for qualified medical expenses. But, to the best of my knowledge, none of my friends were using their HSAs for unqualified expenses.

So, what does this mean to the people of Missouri today? At this specific point in time, very little seems to be happening that has a direct immediate impact on most readers of this blog. The fines and penalties that might become associated with an independent attitude won’t kick in for another few years. But a lot more will happen in other aspects of the health care arena by that time. They say that the true art and science of economics involves an understanding of the changes that occur at the margin, and we need to look at all the little bitty changes, one at a time, to see how they fit. So far, and from this single perspective, these marginal changes are quite minimal. But this is just the beginning. Going through the health care bill section by section during the next few weeks will give us a better idea of what it is really all about.

It is no secret that I believe Congress has no constitutional authority to mandate that citizens purchase a product they do not want. But people who are eager to see this portion of the federal health care reform law struck down would be very wise to put the brakes on the current wave of litigation.

You see, it is a bedrock principle of American law that federal courts cannot offer “advisory opinions.” In order for a federal court to resolve a legal issue, the person or organization presenting that issue to the court must demonstrate that they have suffered, are suffering, or are in immediate danger of suffering some injury. If the complainant can’t show how they are being harmed, the court rules that there is no current “case or controversy” existing between the parties and the case gets thrown out.

In the weeks since Congress adopted the new health care reform law, state officials all over the country have been trumpeting their intent to challenge the law’s constitutionality. Attorneys general, governors, and lieutenant governors in 15 (or more) states have already joined or have pledged to join federal lawsuits intended to strike down the individual health insurance mandate. But there are two big, big problems.

First, the individual mandate is not scheduled to go into effect until 2014. In other words, no one will be required to comply with the mandate for another four years. And, until someone is bound by this requirement, it will be virtually impossible to persuade a court that anyone has been sufficiently harmed by this law to create the “case or controversy” necessary for the court to address the merits of the claim. The second problem is that federal courts do not generally allow one person to assert a claim based on injury suffered by someone else (although there are a few limited exceptions to this rule). Although these state officials could file lawsuits on their own behalves, if they did not have compliant health insurance policies, it is much tougher for them to suggest persuasively that these officials have any basis for asserting the rights of individual citizens, independent of any private citizen asserting a claim against the federal law. The state officials’ claims might have a bit more substance in states that have passed a statute or constitutional amendment limiting governmental authority to interfere with citizens’ decisions regarding health insurance, but it is still a tenuous legal position unless the state is intervening on behalf of a private citizen’s lawsuit.

So, in all likelihood, these impassioned crusades to knock down the health insurance mandate will prove to be utterly worthless until the targeted provision actually takes effect. And, in the meantime, those in support of the mandate will point to the failure of these lawsuits as proof of both the mandate’s constitutionality and the general wrongheadedness of those who oppose the mandate. My advice to these well-intentioned officials is to withdraw their lawsuits for the time being, and for the next four years focus instead on addressing the mandate through the legislative process. If the mandate remains in place after the elections of 2010 and 2012 pass by, then will be the appropriate time to take this issue to the courts.

On Friday, U.S. Reps. Henry Waxman (D-Calif.) and Bart Stupak (D-Mich.) sent a letter to AT&T and several other companies requesting that they verify that the health care bill’s passage will indeed cost the corporations additional expenses. This came after AT&T, which employs 9,000 people in the St. Louis area, said it would record a $1 billion non-cash charge during the first quarter of 2010 because of the tax changes associated with the bill. Under the new law, companies will continue to receive a tax-free subsidy of 28 percent on programs to provide their employees with prescription drug benefits, but they will no longer be able receive the double benefit of deducting the value of the subsidy on their taxes. AT&T said that they will evaluate possible changes to the active and retiree health care benefits offered by the company.

So, let’s recap: The United States Congress passed a bill that makes tax changes. Those tax changes will by design affect corporations’ balance sheets and generate more revenue for the government. When corporations inform the public of these effects, members of Congress request verification of the accuracy of these effects, merely because they contradict what the legislators expected and said would happen.

In the letter, the congressmen state that the bill is “designed to expand coverage and bring down costs,” which makes AT&T’s claims “troubling.” The key word here is “designed.” The legislation may indeed have been designed with the intention of reducing costs, but that doesn’t mean it will actually have that effect when implemented. The letter also cites reports from the Congressional Budget Office and the Business Roundtable projecting that premiums could decrease during the next six to 10 years as a result of the reforms. The report by the Business Roundtable says that “if enacted properly, the right legislative reforms could potentially reduce [premiums] by more than $3,000 per employee” (emphasis added). So, this depends on the right reforms being enacted in the proper way (which we know almost never happens), and then premiums could potentially be reduced. The congressmen neglect to mention in their letter that this report also has a section titled “Risks Could Jeopardize Cost Reductions,” which points out that revenue raisers such as a “high-cost” tax could make health insurance costs worse for affected plans and employees.

The worst thing about this is that the government is asking a private company to explain its accounting, something they have no authority to demand. Beyond filing their taxes accurately, AT&T has no obligation to the government to explain itself, only an obligation to its shareholders. The shareholders are perfectly capable of “verifying” the company’s financial information on their own. The congressmen’s request that AT&T justify the increase in expenses reflects the apparent unwillingness of many legislators to acknowledge the unintended consequences of their legislation.

The Patient Protection and Affordable Care Act was signed into law by President Barack Obama last week, but that won’t stop opponents from continuing to try to shoot it down, or at least shoot holes in it. If you have ever tried to read the provisions of the bill, you know that it is excessively lengthy and wordy, requiring patience and a certain level of commitment to read through in its entirety. Bill sponsors claim the legislation will ensure health care coverage for the 32 million Americans currently living without it, and provide more affordable access to health care. The most central provision, however, is that Americans will be required to purchase health insurance policies.

The signing of the bill has not ended the debate. In fact, it may only be the beginning. House Republicans have already begun fighting the bill, and some have suggested that the Supreme Court may overturn the bill because it violates constitutional provisions. Dave Roland, a Show-Me Institute policy analyst, has written about the potential legal pitfalls that may be faced by the requirement to purchase health insurance.

More information about the final provisions of the bill will undoubtedly become available to the public in the coming days, so that we may better grasp what exactly the bill entails. However, it may well be shot down before it is scheduled to take effect in 2014. We have three years to really understand the changes this legislation will bring.

As Harvard economics professor Jeffrey Miron pointed out at his Obamanomics lecture last week, such intense conflict could be a good thing for the American people. This butting of heads can lead to gridlock, which can help prevent either side from getting everything it wants. Taking into consideration all of the debate and conflict initiated by the bill so far, it may look completely different by the time 2014 rolls around.

Last week, the Missouri Supreme Court ruled on the case Klotz v. Shapiro, which challenged the 2005 tort reform legislation and its $350,000 cap on non-economic damages. The court unanimously declared that state caps on non-economic damages cannot be applied retroactively, but did not declare the caps themselves unconstitutional. This is a big victory for both doctors and patients in Missouri, which is one of several states in which caps on non-economic damages have been challenged in the courts. Just the day before this decision came from the Missouri Supreme Court, the Georgia Supreme Court unanimously overturned the pain and suffering caps that were implemented in 2005. Earlier this year, the Illinois Supreme Court also struck down a law that provided for such caps. We are lucky that Missouri did not follow suit.

In 2004, the Congressional Budget Office conducted a review of nine studies that looked at the effects of tort reform. The review notes that studying tort reform is difficult because of the many types of reform and the issue of controlling for differences between states, but it does present some evidence in favor of imposing caps on non-economic damages. Of the three studies that examined this specific type of reform, two found that premiums declined significantly for at least some insurance lines (the other one found no significant effect). These three studies also found that insurers’ profitability increased after the imposition of caps. Contrary to what some politicians may have you believe, this is a good thing. Health insurance profit margins are typically about 6 percent, give or take a few points, which is very low compared to other forms of insurance. Increased profitability for health insurance companies allows for more firms to survive and compete for business, which will drive down costs and make insurance more affordable.

Opponents of caps on non-economic damages would probably point to this same CBO study, which also points out that malpractice costs account for less than 2 percent of health care spending. But this does not take into account the amount of defensive medicine that is practiced by physicians on a daily basis. According to this Gallup poll of 462 randomly selected U.S. physicians, one in four health care dollars is spent on defensive medicine. The study defined defensive medicine as “the practice of diagnostic or therapeutic measures conducted primarily not to ensure the health of the patient, but as a safeguard against possible malpractice liability. This may include tests, prescriptions, hospitalizations and referrals that may not be medically necessary, but are viewed as providing protection from a potential lawsuit.”

As demonstrated by this survey, this is a very real phenomenon. For example, a young female who complains of frequent headaches might get a brain MRI to rule out a tumor, even though she is young and has minimal risk factors. The only way to legally and definitively say that there is no tumor is by using an MRI, even though clinical suspicion is low and does not warrant the scan. So in a case like this (a real example provided to me by a medical student), legal implication trumps clinical judgment, and the unnecessary tests that result then drive up the cost of health care. Caps on non-economic damages mean that doctors can reduce the amount of defensive medicine they practice, because they know they’re not subject to the arbitrary determinations of juries about how much a plaintiff may deserve in compensation. They can instead focus on using their clinical training to make the proper diagnoses and do their jobs as doctors.

Another tangible benefit of imposing caps on non-economic damages is the increased physician supply that occurs as a result. A study published in 2005 looked at the impact of caps on non-economic damages from 1985 to 2000, and concluded that caps increased the per-capita supply of physicians by 2.2 percent relative to states without caps (another study put this number at 2.4 percent; these studies were summarized by the American Medical Association in this report). Missourians will therefore have greater access to care as a result of the court’s decision in this case.

Unfortunately, because the court did not specifically invalidate the plaintiff’s other complaints about the 2005 tort reform bill’s supposed unconstitutionality, the door is open for more challenges in the future. Let us hope that any such challenges are rejected.

Tomorrow (Tuesday), I’ll be a special guest for the Legal Roundtable segment on Don Marsh’s “St. Louis On The Air” radio show. The show will run from 11:00 a.m. to 12:00 noon on 90.7 KWMU — with live streaming over the Internet available here.

Our primary topic will be the constitutional issue swirling around the new federal health care reform law and Missouri’s Health Care Freedom Act, which would prohibit punishment for individual citizens who decline to purchase a product they may not want.

Gov. Jay Nixon has proposed $120 million in cuts for the state’s Medicaid program. There has been a lot of talk on both sides of the partisan aisle about whether this was a good move, so I decided it would be useful to try putting that number into perspective.

These numbers, though, may not matter for too long. The federal health legislation, set to go into effect in 2014, is expected to expand the Medicaid pool drastically and add at least $1.34 billion total cost over 10 years.

The Kaiser Family State Health Facts website has data on Medicaid spending per enrollee, as well as on total state expenditures. Unfortunately, the site did not have both Medicaid spending data and total state expenditure data available for the same ranges of years, so my comparisons are not perfect. They do, however, serve to illuminate the spirit of the argument. The figures for Medicaid spending per enrollee are from 2006, the state expenditure figures are from 2004, and total Medicaid spending is from 2007.

Here are some spending facts for Missouri:

According to American Academy of Pediatrics in Missouri in 2007, the state will lose $1.60 in federal matching funds for every $1 it cuts from its state Medicaid budget.  The governor proposed a $120 million cut from the Medicaid budget, so assuming that proportion does not change, we can extrapolate that to be about $312 million total from the Medicaid budget.  As of September 2009, MO HealthNet had 865,477 enrollees, and $312 million averages to around $360.49 in cuts per enrollee.  This means that the cut amounts to approximately 8 percent of the 2006 amount per enrollee.

So, even without a close analysis of which services are being cut, it is clear that this amount is not as alarming as might be expected.  (It would place Missouri  43rd in the country on per-capita expenditure, based on the numbers from 2006.)

Frankly, I believe the real issue is how these cuts are made. Medicaid and Medicare are large black holes for resources that have the potential to swallow the state and federal budgets. It is not sustainable for them to grow continuously, and would be better if they could be shifted into the private sector via vouchers or well-designed cuts. Spending large amounts of money on Medicaid, if not spent in the right manner, can be even more detrimental than a smaller amount because it can distort the market and incentive structures. A closer analysis of how these cuts are being done is necessary to come to any distinct conclusions, but the numbers by themselves are not as frightening as some may believe.

This essay on the Huffington Post sees calorie count mandates as the beginning of a “food revolution”:

[T]his could be seen as a historical turning point in the American consciousness about actually having awareness about where food comes from and what goes into how it gets made.

Most advocates for calorie count mandates emphasize the effect they could have on the population’s health. They say that if people read caloric data whenever they order food, they’ll make healthier choices and put less of a strain on the health care system.

The Huffington Post essay is unusual in that it connects calorie counts to the local food movement. At first glance, this seems puzzling, because a calorie count tells you nothing about where your food comes from. Furthermore, a dish that was served up from scratch in your home town might be high in calories, while produce flown in from hundreds of miles away could contain fewer calories. Supposing consumers pay attention to the calorie counts and consequently reduce the calories they consume — there’s evidence that they don’t, but supposing they do — the effect could be to discourage some people from eating local food. For example, think of people who live next to a cattle farm and have access to local hamburgers, but can’t buy vegetables unless they’re shipped in.

However, the Huffington Post writer may be on to something. Once people are comfortable with calorie counts on the menu board of every major chain restaurant, they’ll be less likely to object new national labeling mandates. They’ll take it for granted that the federal government tells restaurants what to write on menus. Proposals to label food as “local” or “organic” will then meet with less opposition.